Linux never had to overtake Windows to be relevant, I'm more concerned that it seems totally stagnant.
I disagree that the interface is years behind, but would agree that the experience is behind. I've always been impressed with GNOME and think it's a better interface than OSX or Windows 7. When I switched to Ubuntu a few years ago (I've since switched back to Windows for various reasons), I expected to have a really stable operating system that was perhaps a little harder to use than a mainstream OS. What I found was that it was actually a joy to use, but it was really unstable. Not because of the OS itself, but because of the buggy apps that ran on top of it. Linux users have some great apps, but are still stuck with subpar alternatives for a lot of stuff (particularly in multimedia).
And then there's hardware support. From what I've heard, things are pretty easy on desktops, but I had a lot of trouble using it on laptops. There are a few companies that sell laptops with Ubuntu or other distros preloaded, but other than that you can face a lot of challenges trying to wrap Windows drivers and so forth.
The hardware aspect might be easier on phones and tablets, but it's going to mean starting almost entirely over on the UI and applications (which is the direction Unity is going).