As more layoffs continue and consumer confidence erodes, recession will be a self-fulfilling prophecy. People expect payback to come for the wastefulness of the past two - three years and, coupled with layoffs and the decline of the uberbloated tech industry, it will gradually turn into recession. Some localized areas of the economy will profit, but most will decline across the board.
Erosion of rights will continue largely unnoticed as people begin using DVDs and hard drive makers use the new ATA specs we've heard about. Though Linux's height of popularity was during late '99 to early '00, keeping hold of the GPL will prove worthy and extremely beneficial for power users, but not for the mass computer users who will prefer ease of use. Someone will discover a way to crack the ATA specs and he will have his computer equipment confiscated and the code will be repressed.
Hackers will become more resented and more misunderstood as kr4x0r skr1pt kiddies fsck up some key websites or online resources. As the erosion of rights continues, however, white hats will be viewed as necessary to regain or promote certain freedoms. Hackers will always have a degree of freedom that the average person doesn't.
Most public (IPO'ed) Linux or proprietary UNIX companies (a la SCO/Caldera, etc.) will fade or die with the exception of one or possibly two. Red Hat will start to show serious financial difficulties by Q2 or Q3. As a company based on a less-than-perfect proprietary technology with only a niche market and no fab plant, Transmeta's recent IPO means they will also have to convince investors that Crusoe is not a BetaMax or a NeXT Computer -- superior in design, but expensive and too niche-oriented for a proprietary product that needs mass marketing.
Intel will try to dump some of their consumer hardware products to focus on their microprocessors and reclaim marketshare lost to AMD. Since Intel has already spread themselves too thin, however, AMD will continue to clone it better and cheaper. Intel will remain as the stiff-lipped inventor and AMD will remain as the witty innovator.
Debian will gain more popularity as the "Linux Distribution" as end-users want to use Linux but have problems with Red Hat's continuing problems with QC and focus on the Enterprise market, consisting largely of failing dot-coms and ISPs. Linus' refusal to be friendly to Big Iron clashes with Red Hat's focus on it. No code fork happens, however.
Linux, having established its marketing message already, will not be viewed as a "revolution" anymore (this will be highly passe and frowned upon as overly propagandic) and the dogma will have been toned down as we can already see... even on Slashdot. Most users will go back to/continue using products by Microsoft, which will continue to muscle around competitors, but just under the margin to provoke public ire again.
Overall Linux and BSD use will continue to increase as they are both used instead of proprietary UNIXes on servers. End-user usage will increase gradually, but both flavors of UNIX will continue to be viewed as niche products.
For those that remain, the free software community will once again become a smallish community, but the developments in free software will be noticed by popular media from its previous exposure. This will be a mixed blessing.
Linus' book will be overpromoted with a nice smiling pic of him on the front with his arms folded... and he'll lose overall credibility as the angrier portions of the community call him a sell-out. There will be mutations of the photograph published on the Internet that some will place as their X desktop.