Does Hotmail really offer two-factor authentication? [closed]

Posted by Brian Koser on Super User See other posts from Super User or by Brian Koser
Published on 2012-06-11T02:51:20Z Indexed on 2012/06/11 4:42 UTC
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passwords

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authentication

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hotmail

I've read multiple news articles that claim Hotmail offers two-factor authentication. One of the articles describes Hotmail's system, saying

...whenever you go to Hotmail...you can choose to get a single-use code–a string of numbers that will be sent via text message to your phone–to use instead of your password.

Is this an accurate description of Hotmail's system?
If so, does Hotmail really offer two-factor authentication? If you can use either your password or a single-use code, it seems to me that it does not.
Is this system really more secure than just having a password? Doesn't this just make an additional "key" available to a hacker? (I must be wrong here, I know the folks at Microsoft are much smarter than I am).

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