So now it's out of the bag. Google is actually going to charge money for software. Its collections of office tools will put it in competition with Microsoft Office, a huge cash cow for Microsoft. These tools include documents, spreadsheets, e-mail, calendars, etc.
The Google differentiator is that these will be Web-based. You no longer have to worry about which version of your document is on which machine, or how you will access one spreadsheet from anther computer. Everything will reside with Google. Moreover, you can identify others who will be able to access the same documents, spreadsheets, etc., so everyone can collaborate.
Of course, the question on everyone's lips is "How will they fare against Microsoft.?" Some think the Web functionality will be enough of a draw to lure customers away from MS. Others argue that Microsoft has the brand that conveys reliability. (Actually, reliability is not what most people think of when they think of Microsoft.)
Moreover, Google's got pretty impressive brand recognition itself. In fact, in light of this week's product announcements, last year's purchase of YouTube.com makes more sense. Why would a company spend over $1.5 billion on a bunch of home movies? Because they can!