Google only interested in revenue. I feel used.
Consider this quote, from a USA Today article that went up today:
Cole Brodman, T-Mobile's chief development officer, says Google's basic wireless goal is to use Android to better target ads to wireless customers so it can charge advertisers more.
By combining "unique information about consumers from the Web," he says, with "other information" from mobile devices, such as location, "Google believes search responses can be much more targeted for Google, and that the value they can bring back to advertisers can be quite a bit higher."
What is this quote telling us? That Google is a sneaky pubicly-traded bastard who woos us with the promise of a free, open, powerful mobile OS just so it can get its targeted-ad-enabling hooks into every aspect of our most personal electronic device. This is a dirty game they're playing: give us a free tool and monitor what we do with so as to make money off our good will. That Google's motives for creating and releasing Google are the same as they've been for every other tool they've created: offer us a valuable, powerful, and free service and through our use of that service compile data that it can use to generate ads that are more effectively targeted. Sounds like Google Search. Or Gmail. Or Google Reader.
History has shown that this is a win-win. Google has introduced services that have changed the landscape of the web and empowered users while turning them into a revenue-generating monolith of staggering proportions. And while there are valid privacy concerns engendered by this paradigm, Google has yet to either egregiously misuse the information it collects or allow a third, potentially malicious, party to do so (at least to my knowledge.)
Android is apparently not destined to be merely a pocketsized billboard, either. From elsewhere in the article:
Android won't favor Google over Yahoo and other search-engine rivals. [Brodman] says consumers also can "opt out" of Google's "cookies," used to track their movements on the Web.
The idea here is clear: put the technology first, offer a powerful product, and include the revenue generation as an opt-out component that is as unobtrusive as possible.
All right, I'm sounding like a fanboy. I'm no Sergey-lover, if that's what you're thinking. But I do think that Google (and Yahoo, and much of "Web 2.0") have developed a business model that someone with a distrust of overt capitalists and uberCorporations (like myself) can, tentatively, live with.

Ad revenue-driven free mobile software
I fully agree with your final conclusion about the business pattern Google has been pursuing since Google Search childhood days.
So far Google has been rolling out web services that were supposed to seamlessly integrate with other services and every living creature (ahem, customer) on the planet. Sure, they had varying success in the process.
Stepping up, or better said, stepping down a layer or two, onto the development platform, is a great sign by itself of the new era. This era is supposed to bring Web2.0 attribute of remixability and reusability of content and functionality beyond the single device (which so far has been either desktop/laptop or a mobile device).
I think that Android provides, above all, necessary underpinnings to create software above the level of a single device that Tim O'Reilly has been waiting/hoping for some time already - http://radar.oreilly.com/archives/2007/11/software_above_single_device.h...
Cheers!
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