Google's moves should never be ignored, although this initiative by itself, isn't a huge threat. A similar page publishing software in Blogger (from Google) has been out for awhile, and hasn't greatly affected traditional hosting companies.
However, this is just a first step in becoming a complete hosting solutions provider, which in my opinion is not a question of if, but when. Both 1&1 and GoDaddy have taken huge chunks of market share with their entrances into the U.S. and global markets (respectively). Godaddy gained about 2.5 million host names last year, making them the world's largest host at a total of close to 6 million now. They stole the top spot from 1&1, who still put up an increase of 1 million host names to end at 5.5 million in 2005 (despite flattening out in the 4th quarter).
When you compare those numbers with estimates of around 75 million to 100 million websites globally with increases of about 15 million annually, it's evident that a big brand can move into the market and take a large piece of the hosting pie. But consider that both Godaddy and 1and1 don't even show up on
global brand or
U.S. brand rankings. Guess who's
number 1?