it's decent. not world-class, but getting better. the light rail was recently extended and future plans for expansion seem to be met with approval, although they're at least a decade off. the buses are crowded during peak hours which at least means they're being used. in my opinion, a lot of the region's problems with transportation stem from the sudden spike in people living here and the challenging nature of the geography. for example, a bus from Queen Anne to Captiol Hill is not exactly practical because there's a big lake in the way, so anybody wanting to bus between the two has to change buses somewhere downtown or walk some leg of the trip.
Yes, walking to work is definitely an option, a significant percentage of the population does exactly that, with biking being another very popular option for people that want to live in the suburbs. My commute to work in Seattle has always been walking, across multiple offices and companies.
Tech companies in Seattle are clustered in a few different neighborhoods, but most of them are walkable from their respective neighborhoods. That said, tech companies are slowly migrating toward the greater downtown area due to the gravitational pull of techies that want to live there. And everything in the greater downtown area is walkable if you don't mind walking (and people in Seattle don't). It isn't a small area.
Microsoft specifically, though, is still mostly on the "east side" (the metro area has a 88 square kilometer lake in the middle, Seattle proper is between the "west side" of the lake and the bay). Microsoft has offices in the major urban neighborhoods but still have a huge campus in Redmond (an east side suburb).