The real news is the Cloud Drive. They beat all other major players to the market and have done it pretty well. From what I can tell you can upload any file within the size limits (2 GB); even .sam files that Google Docs does not allow. With the ability to purchase additional storage beyond the free 5 GB you could almost move 100% to the cloud. The prices still need to come down though because $1,000/year is a way to high for 1 TB. Once one terabyte is under $100 a year we will see wide adoption of cloud storage. The storage uses their reliable and secure S3 infrastructure. Amazon's new service is so easy to use that it will help with its adoption.
Even with this, another large company can swoop in and out do Amazon easily. As users transition to the cloud they need a simple way to use and sync their physical drives with their cloud ones; much like Dropbox does. If someone added that and also the ability to upload folders and files (hierarchy) we would have a winner.
I will certainly use Amazon Cloud Drive, especially for large files I need to move from one location to another, but not for everything. My hope is Google will still answer the call and bring us all a seamless integration cloud drive with less expensive storage options.