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    From my limited and probably completly wrong understanding, if Google tried to get into the OS market, It would be through more of a 'Dumb Terminal' architecture (terminal runs a simple os that provides framwork for connecting to google servers and displaying content). 

    If this was the case, I would see this as being a larger contender for MSFT than Linux.  Mom and Dad (or Grandma and Grandpa) want a computer that works like a tv; Turn it on, press a few buttons and you get the stuff you wanted.  A terminal, connected to a high speed connection could be very usful to people who only turn on their computer once a week to check their email.

    Of course, the issue google will have with any sort of network storage, regardless of delivery format, is will people feel safe giving personal information to a company that is first and formost a search engine.