The rumors have finally been confirmed, Google is working on an operating system.
My thoughts on this are simple and limited: I see a small niche market for such an OS, but I just don't see the majority of computer users willing to accept web-only applications across the board. Connectivity is just too inconsistent and unreliable at this point, and even trying to own "constant connectivity" access (3G-based mobile and/or wi-fi access point access) is still way too expensive. Do we really think the 3G carriers are going to spend billions to make 3G as reliable and fast as the broadband that we're all used to getting at home and work? I doubt it. Without that, the web-only user experience will suck, because it won't be consistent.
Not to mention that I, personally, consider most web-based apps that attempt to replace a desktop app to be inferior in key ways. There are exceptions, and things are improving, but not enough for me to see this being a broad appeal by next year.
Having said that, I'm not foolish enough to bet against Google, who have quite a track record of success when it comes to delivering on new ideas and technology.