Recently Apple enabled two-factor authentication for Apple ID and Google enabled it last year. Now, its time for Microsoft. According to report from Liveside, Microsoft is already testing two-factor authentication for Microsoft accounts and it may be enabled for all the accounts soon.
By setting up “Two-step verification”, when logging in to your Microsoft account from any device or apps (with the exception of devices added to your trusted PC list), in addition to typing in your password you will also be prompted to enter a security code randomly generated by an Authenticator app on your phone.
There is also a Authenticator app for Windows Phone devices which lets you generate security codes. Read about it here.