It's not a cellphone but it plays one on TV. From today's WSJ (sub req'd):
Google Inc. is teaming up with handset maker Nokia Corp., in a move that could help propel the Internet company into mobile communications. The companies plan to launch a version of Nokia's hand-held Internet browsing device ready loaded with Google's Google Talk service, which enables users to have voice conversations and exchange instant messages, according to a person familiar with the plans. The device, which relies on short-range technology known as Wi-Fi rather than cellphone networks, isn't a cellphone.
The device will be based on the Nokia 770 "Internet tablet," which didn't have a phone. But with Wi-Fi and Google Talk (which they will eventually expand to out-of-network calling), it could become one in addition to the other stuff it does. The development of the right "form factor" is one of the keys to mobile Internet usage.
Google CEO Eric Schmidt in his remarks at Google Press Day discussed the mobile opportunity as being bigger over the long term than the Internet, given that there will be more mobile devices globally and the immediacy of the mobile use case (mobile-local search).