They didn't hold back the Internet 6-7 years. IE was far, far beyond whatever competitors offered, it might be more fair to say that Microsoft released IE6 years too early. AJAX, CSS, JS, all the cool technologies that make the web today were part of IE 6 (but not quite at the level they are today of course), and in addition to that there were some DirectX accelerated graphics, an advanced plugin system while other browsers only supported NSAPI, etc.
After that there was little innovation from Microsoft, but there was little need for innovation either, most developers looking for advanced capabilities used Flash instead of addressing the web browser natively, because that was the trend back then and Flash works on other brands of browsers as well, and for a while because a lot of people still used older browsers. For those reasons there was no developer demand for more advanced features, the features that were offered were hardly used for a long time
For example AJAX was publicly introduced in IE5 in 1999, while other non-beta versions of competitors appeared from 2002 to 2005. Websites using AJAX thus were rare until about 2004-2005. There was no need for Microsoft to add more technology until the competitors caught up. Unfortunately for Microsoft, the competitors didn't just catch up, they overtook them and implemented some features differently than in IE, those missing and different features in IE have caused plenty of grief for web developers ever since.
After that there was little innovation from Microsoft, but there was little need for innovation either, most developers looking for advanced capabilities used Flash instead of addressing the web browser natively, because that was the trend back then and Flash works on other brands of browsers as well, and for a while because a lot of people still used older browsers. For those reasons there was no developer demand for more advanced features, the features that were offered were hardly used for a long time
For example AJAX was publicly introduced in IE5 in 1999, while other non-beta versions of competitors appeared from 2002 to 2005. Websites using AJAX thus were rare until about 2004-2005. There was no need for Microsoft to add more technology until the competitors caught up. Unfortunately for Microsoft, the competitors didn't just catch up, they overtook them and implemented some features differently than in IE, those missing and different features in IE have caused plenty of grief for web developers ever since.