I saw this on Slashdot today, and I have to say, I'm intrigued.  The article, as expected, spawned lots and lots of the usual Slashdot speculation, with plenty of Microsoft bashing just for good measure.

Having run a few Linux distros, I have to say, I really do like Ubuntu, and if Google can make a consumer release version, I think it'll be a lot of fun for us geeky types who like to run Linux.  I don't see this taking off on the home or corporate fronts, though.  People want their favorite app of choice, and they want it to work in a supported environment (not Wine).

Don't get me wrong;  I'm a big Google fan.  I think they've got a corner on "getting it."  But whatever this Ubuntu-based project they're working on is, I seriously doubt it's going to be anything that can compete with Windows.  An internet appliance, I might believe.  A PC operating system?  I'll believe it when I see it.