Coming this week (tomorrow). Here's more from Om Malik and the WSJ (sub req'd). Bit by bit it appears that Google is building a competitive, web-based Office alternative (and not adopting Open Office).
Schmidt & Co. have recently said "we're focused on search." But this is not search; it's another non-search application, like mail or calendar (that will no doubt have search embedded in it). Why do this? is the really interesting question from my point of view. More loyalty/usage = more ad inventory? Clearly this isn't about ad inventory really. It's almost like Google can't help itself in some sort of involuntary, inexorable drive to be "the network" or be to the Internet what MSFT has been to the PC desktop to date.
Here's what I wrote about Google + Writely when the deal was first announced, about a larger potential vision combining low-cost computing, free ubiquitous access and online storage and services.
As a practical matter this will not be a threat to MSFT's Excel in the near term. Here's more from AP and the NY Times (reg. req'd).
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Lots more detail from Danny Sullivan.
Screenwerk 
June 6, 2006 at 12:03 pm
Google is directly competing with open source projects like OpenOffice and Sun’s free StarOffice.
Google acquired Writely (word processing) and now has a spreadsheet. There was speculation last year that Google would partner with Sun to offer a version of StarOffice. Instead Google has decided to go its own way and compete with OpenOffice and StarOffice.
C/Net says “Google spreadsheets turns up heat on Excel” I don’t think so. Microsoft Office is a powerful, industrial strength, client based, information worker productivity platform. Microsoft Office is moving beyond just being a collection of applications (Word, Excel, PowerPoint) to being a server based application platform for ISVs. Lots of companies run their business on Excel spreadsheets. Now creative start-ups are using Office as a front end User Interface to a whole variety of business applications.
I wrote a blog on this subject today http://dondodge.typepad.com/the_next_big_thing/2006/06/google_competin.html