Yahoo! might be the healthy competition which keeps the companies growing, but the situation between the two giants is the popular opinion. Not many people know that at the moment, Yahoo! is actually bigger than Google in everyway, except in fan followings, and that is what is so important. Google gained a lot during the initial bubble, and gained many followers (including me), but when the bubble burst, no-one got to know and they still think that Google is their saviour. With small surfacings here and there, a leaked document with 'big plans' printed all over it, or a flashy acquisition here and there keeps it in the public eye, and in people's minds. I could be wrong about this notion, and I hope I am, because if people don't see how this could turn up, we could have a Googlesoft on our hands sooner than we think!
If you've watched the Grid movie, you would have seen a mention of Googlezon, which is sort of a merger between Amazon and Google in which Amazon would provide the huge commercial backing, and Google would provide the algorithms and computing power. Together, they plan on making the information of the world contextual. Which means that everything is linked to the Grid. I won't explain what all this means, for that see the movie, but I will speculate that to reach that target, Google will have to scan through all the data in the grid, which also will include all the user uploaded files. Something like this was already under scrutiny for mails when GMail came to light, and the side-clippy ads. But mail is something quite different from personal files, and I don't know how people will take it. It might result in the classic 'ban dihydrogen monoxide' scenario where people might be frightened to believe in something thats not entirely true.
This will be a jackpot for all those anti Google sites that keep cropping up every once in a while, stating how Google is evil. Wait till they start writing about this. If you see it from a consumers point of view, everything about what Google is doing is going to help us in some way or the other. But if you let your paranoia about privacy concerns and saving your precious files somewhere else step in, then you will not be able to understand or appreciate the evident advantages of such techniques, and Google's plans for the Evolving Personalized Information Construct (EPIC). With everything going for Google at the moment, including very ambitious plans, I can only imagine how our access to information, and how many facets of our life will change by the time the Grid comes online!
[Update]: Looks like Google got beaten by their future "partner"! :P (see it here)