Version Differences
There are two versions of Killer Instinct: the Microsoft Store version (for Windows 10 PCs and Xbox systems) and the Steam version. I frequently hear PC players interested in KI asking about which version they should buy, and what the differences are between them. The short answer is that both versions are good, and you can't really go wrong with either. The long answer is that one version might be slightly better for you depending on your preferences, so let's dive into those differences.
How the Versions Are the Same
Both versions have all the content. This is the most important thing, ultimately. You won't have to worry about any exclusive characters, stages, or single-player content. Both versions will run equally well performance-wise on your PC.
Both versions cost the same (with a caveat). To get all the content, it costs $40 USD for both versions. The Microsoft Store version, however, has a free-to-play option, which you can check out here. You'll get access to all gameplay modes, offline and online, but can only use Jago and a rotating free character. It's great if you just want to see if the game hooks you, without spending any cash. You can upgrade, or use Xbox Game Pass, to get the Definitive Edition when you want the full roster (I'd advise against buying individual characters at this point, and go for the much better deal with the DE). The Steam version has no free-to-play option; buying it will give you all the content in the Definitive Edition.
Both versions frequently go on sale. The MS Store and Steam versions will independently go on sale for $10 USD once every month or so. If you are looking to pick up the game, waiting for one of these common sales is not a bad idea! If you end up enjoying the game, I would also recommend picking up the version you don't own the next time it hits the $10 price. It can be useful to own both versions if you play the game often.
Both versions can cross-play in Exhibition or Lobby modes. Exhibition is a 1v1-only mode that has instant rematch without loading times and no spectating; it's effectively the offline versus mode, but online. Lobby mode allows up to 8 players to play or spectate, and after each match, the winner stays and the loser is bumped to the end of the line. MS Store and Steam players can play against each other in either of these modes. You cannot play Ranked Mode against players on the other version. They will have their own separate player bases.
If you want to play Lobby or Exhibition mode against someone on the same version, you can easily invite players to the room using your platform's invite system (either the Win10 Xbox App, or the Steam Friends interface). Unfortunately, you can't simply invite a cross-platform friend to the room. Instead, you will have to set up your Lobby or Exhibition room to have specific parameters, such as "Lobby Size" and "Lobby Name", tell those to your friend, and ask them to search for those parameters after you've created the room. This is annoying, but you'll usually find each other pretty quickly. Once you're in the room, you can play a long session without further irritation.
How the Versions Are Different
If you want to play Ranked Mode, buy the MS Store version. The Steam version has its own Ranked player pool, but it is considerably less populated than the MS Store version, which includes Xbox players. While Steam players will still find lots of people to play against by queuing up for the cross-platform Exhibition or Lobby modes, the extra Ranked player base is a strong point in favor of the MS Store version.
The Steam version is slightly easier to work with. It has better controller support (some arcade sticks and PlayStation pads might need to use DS4Windows or similar workarounds on the MS Store version), and the Steam version avoids some Teredo networking issues that can crop up with a small percentage of Windows 10 installations.
Lastly, there are some small issues which may or may not bother you. It's easier to be anonymous when playing on the Steam version, since you can change your display name, while the MS Store version always shows your Gamertag. If you like talking to friends on Discord through your microphone while playing, be warned that the Steam version will always broadcast your voice (you can mute your own mic for the MS Store version in Windows 10's App settings). While you can't control your own mic, you can individually mute opponents. This means if you're playing with friends, you can mutually agree to mute each other in game and chat over other channels without problems. But if you're playing against randoms on Steam, you'll have a hot mic unless they choose to manually mute you or you've switched your mic off on the hardware side.
Which Version Should I Buy?
Because of the option to play more opponents in Ranked Mode, buying the MS Store version seems like the much preferred choice. And if your controller works and you don't mind playing with the same username all the time, I'd agree that's the version to go for by default. That said, if you plan to play against specific friends often, I'd buy the version they have, so inviting each other to the same room doesn't require jumping through some hoops. And if none of what I've said has swayed you one way or the other, buy the version that is currently on sale and you'll be just fine.