The first thing you learn when you start paying attention to industry news is that the tech media are a bunch of gibbering morons. That is why when Chrome OS was announced, you got headlines like:

• Google Drops A Nuclear Bomb On Microsoft. And It's Made of Chrome.
• With Chrome OS, Google Intends to Destroy the Desktop and Microsoft
• Google rides Chrome OS onto Microsoft turf

The sad truth is that Windows is only in competition with Chrome in areas where windows exists because nobody has bothered to do anything better for a specific niche yet. This is google setting up shop in a niche, not looking to topple MS.

Chrome is basically an extremely light weight OS, that is only really there to house a browser. The amount of people who only use their computer for facebook, email, chat, and web browsing is pretty large, the question isn't why is google developing a portable browser appliance, the question is why haven't people done this before.

Just think, with no local storage, you can throw out the hard drive and replace it with cheap flash memory. With a minimal OS you need as much ram and cpu power as a few instances of flash will require. The requirements are less then the lowest end netbook, if they make good enough deals, they could ship 12" machines between 50-100$ that basically connect to a network and launch a browser. The price is right, the size is right, the weight would be next to nothing, and nobody can match the 3-4 seconds between power on to internet browsing.

That sounds like a really attractive device, I know if it is less then 100$ I'll definately be picking one up.