"Google Chrome OS is an open source, lightweight operating system that will initially be targeted at netbooks" and "most of the user experience takes place on the web." That is, it's "Google Chrome running within a new windowing system on top of a Linux kernel" with the web as the platform. It runs on x86 processors (like your standard Core 2 Duo) and ARM processors (like inside every mobile smartphone). Underneath lays security architecture that's completely redesigned to be virus-resistant and easy to update.
UPDATE: Google Chrome OS has been a success to the follow on market known as Chromebooks.
Google Chrome OS, What is it exactly? Well besides a very wordy concept that Google has announced to be coming to netbooks in 2010 (a year from now) it is Google's interpretation of the Operating System if it were invented today. Similar to how the Chrome web browser was a reinvention of the web experience, Chrome OS is to be to the Operating System department. Most of the time spent at a computer is using the web browser for use with online tools like: Email, Chat, Music, Movies, Social Networking, Document Creation, Corroboration, and the list goes on. Because of this fact, why do people need this monster hog called an Operating System? Google took this idea and came up with an innovative concept of mixing the browser and the Operating System into one (a kind of mesh if you will). Will it work? Only time will tell.\n\n
What makes this possible? Well the browser was invented back in 1990 and was very slow. Looking at modern browsers like Chrome, Firefox, Opera, and Safari, we have the productivity and stability that this kind of project needs to be successful. This will redefine what it means to be a "web app" since Chrome OS will integrate web applications deeply into the Operating System. This means that Chrome OS will only use web applications, but they will not feel like web applications but more like native applications. How is this possible you may ask, with HTML 5, that's how. This is the next version of HTML, which gives the browser more access to local resources including: location and offline storage. With these new resources available to web applications the more they will behave like native applications.
Restrictions that you might have already thought of include: hardware support, internet speeds, internet reliability, etc. There are a multitude of questions that are swarming around this idea of having the web browser and Operating System so intertwined. The hardware support problem has been address today at the announcement of Google Chrome OS as to only being allowed on Google Chrome OS devices (aka hardware that has been approved by Google; either component by component, or in the whole package)
Below I have gathered a few videos that will shed some light on the topic of Google Chrome OS.
What is Google Chrome OS (as explained by Google)
<iframe width="640" height="360" src="https://www.youtube.com/embed/0QRO3gKj3qw?feature=player_embedded" frameborder="0" allowfullscreen>
Google Chrome OS UI Concept Video
<iframe width="640" height="360" src="https://www.youtube.com/embed/hJ57xzo287U?feature=player_embedded" frameborder="0" allowfullscreen>
I will post more information as it becomes available, until then have a look at the following blog articles for more...
Google: Introducing Google Chrome OS
Wikipedia: Google Chrome OS
Gizmodo: Everything You Need To Know About Chrome OS
Gizmodo: What Google Needs For Chrome OS To Make It
Nick Eaton (Microsoft Reporter): Google Chrome OS To Launch In A Year
UPDATE: They started shipping CR-48s out to the development and news outlets (box art pictured below). These are prototype devices to what later came known as Chromebooks and took the personal computing market by storm.