Edit/clarification: @InclinedPlane This does not mean I have a "disrespect" of Google; it's more that I'm siding with the benefits of "separation of control," just like any good accounting information systems analyst would do.
Your identity is too important to be owned by any one company.
Your friends are too important to be owned by any one company.
A Solution
The browser is your personal and trusted agent to the web. It’s the only actor on the Internet stage which both knows everything you do on the web, and never has to let that data leave the privacy of your desktop. Your browser knows you (or, at least, should).
So if Google goes into the Operating System realm, too, people will have real reason to worry; it'll be even easier for it (Google) to erase those lines between public and private data. And it all starts in the browser. If Microsoft didn't illustrate this, I don't know what did.
Maybe Firefox should counter-move and develop its own search engine.
I agree, the thought of the entire end-to-end internet experience (OS, browser, ISP, DNS, search, hosting, etc.) all within the smothering confines of a single company is something I don't look forward to, regardless of whether that company is MS or IBM or Google or Apple or anyone.
To Google's credit, they've open sourced some of the work they've done (GWT, Chrome, Chrome OS, etc.) so in theory there's a pressure relief valve there. One of the great boons of open source is that it does provide that pressure valve so that people have alternatives if mainstream software becomes too oppressive (though this is a side benefit, a lot of OSS is as good as or better than the commercial alternatives).
It's really a shame that nobody has yet figured out how to compete fully with Google. There have been a lot of attempts, but there is still such a huge gap that's it's somewhat disheartening. Google revolutionized server management, data center management, and web application development nearly a decade ago and nobody has really caught up to them on all counts yet. I'm not sure whether that's a testament to their genius or to the sad state of the rest of the industry, but it looks like it's likely to be a controlling factor in the nature of the internet for some time to come.
Check out this musing from Aza Raskin (http://www.azarask.in/blog/post/identity-in-the-browser-fire...):
Your identity is too important to be owned by any one company. Your friends are too important to be owned by any one company. A Solution
The browser is your personal and trusted agent to the web. It’s the only actor on the Internet stage which both knows everything you do on the web, and never has to let that data leave the privacy of your desktop. Your browser knows you (or, at least, should).
So if Google goes into the Operating System realm, too, people will have real reason to worry; it'll be even easier for it (Google) to erase those lines between public and private data. And it all starts in the browser. If Microsoft didn't illustrate this, I don't know what did.
Maybe Firefox should counter-move and develop its own search engine.