There are many ways to look at the launch of Google’s new Apps platform, but for me, it looks like a pretty cool and very low cost ($50/year/user) way for a small business to do a web site without traditional hosting, and with a bunch of neat features.
Because it supports direct domain (as well as sub-domain) hosting and includes integrated e-mail as well as a bunch of features (from Google Page Creator for creating web pages to calendars and other forms of collaboration), it’s quite powerful. More info here specifically for small businesses.
I think the biggest challenge will be having small businesses understand the scope of what’s being offered.
On the other hand, the bigger business story for larger enterprises and the broader IT market is that Google is Challenging Microsoft (NYTimes) with a service that offers email and more for $50/user vs $225/user annually using Office and Exchange.