CNet article on Google Chrome
Evidently there was someone using it in March to browse a CNet site. Reading deeper into the article and we find that CNet has some incredible data retention for your browsing habits.
I think Chrome will appeal to a particular portion of the market and not to the mainstream. Since they are pushing it as a thin-client architecture, that means the muscle is on the web. If you run Google Gears in your current browser, that is about the effect that it will have. You surf the web, you check email, you check your voicemails, keep up with web sites, type the occasional document with Google Docs, etc. Since it is a thin client, the CPU requirements for it won't be intense allowing your Aunt or Grandmother to use an old machine that would otherwise be unconnected. Or, you could enable a school to use older Pentium III machines and still experience the web. 3d gaming and other processor intensive games aren't what Google OS is targeting. Applications that currently run on the machine would be replaced by cloud applications. Quicken via cloud, etc. It is a bold step and you are changing the way people need to think.
Imagine the OLPC initiative if you only had to use a thin-client architecture. The CPU and RAM requirements would be small as long as the person could connect to the net. Your smartphone would require less cpu horsepower because the cloud is doing the work for you. One of the GPS apps for the IPhone already does this -- when you ask for a path, it is calculated on their server and the turn by turn navigation is sent to your phone as a small 'path payload'.
Google OS isn't for everyone -- it is going to be for the people not currently on the net or those that have older hardware. My mom doesn't play games on the computer -- she uses email, downloads pictures, writes the occasional letter to send to her friends that don't have computers. Students that are writing code in classrooms today could be learning python with the app engine so that they could write tomorrows cloud applications.
Those are google's targets.
I don't believe they are trying to get everyone under the sun to use their OS - they are trying to hand utility to the people that may not have a great experience today with their older hardware or with limited budgets for computers.
Based on linux, yes. Recognizable as Linux from the outside? probably not. The Chrome browser is barely recognizable as being based on Safari's Webkit.