Update: Here is a link to the official Google coverage of the announcement on YouTube.
What is Google App Engine? Well, detailed coverage is all over the web; see:
Mike Arrington (TechCrunch)However, the short-short version is it is a complete scalable and manageable runtime environment to build, test and run scalable web applications. (I don't say "highly scalable" for reasons that will be clear later.) This environment is made up of the following five core components (today):What this all means: Google App Engine is designed for developers who want to run their entire application stack, soup to nuts, on Google resources. Amazon, by contrast, offers more of an a la carte offering with which developers can pick and choose what resources they want to use.Bob Warfield (SmoothSpan)   
- Scalable Serving Infrastructure - Basically the Google infrastructure, including everything but the Python code and web templates themselves
- Python Runtime - All of the infrastructure to deliver and execute your application in a distributed environment
- Software Development Kit - Allows you to code your application on your local system before deploying to Google.
- Web-based Admin Console - A web application including at least simplistic version management (including rollback), running system statistics and errors, access to the datastore (see below) and access to log files
- Datastore - BigTable storage (I don't know enough about BigTable yet to say more)
200 Megacycles CPU
10GB Bandwidth In/Out
Should be around 5 million page views a month for the average web application. This is a reasonable scale, but would not qualify as "highly scalable" in most large web properties' books.
What does this add up to, in my opinion? The ultimate cloud lock-in story. (As background, watch Scoble's first video from about 3:17-5:25.) Not a single thing in your web application will not be dependent on Google if you use this technology--not even your Python code. (For proof, check out the "includes" in the coding demo--at around 8:44 of the first video.) Everything you do will depend on a piece of Google intellectual property. You datastore is BigTable, your operations environment is Web Operations Center, etc., etc., etc.
This isn't cloud computing, its just a cool web app hosting tool. OK, I exaggerate. It is cloud, but its exactly the kind of cloud most enterprises should avoid. If you are building a web business, and this tickles your fancy, go for it. You can't beat the price, and you've got to love the feature set. If you are a Fortune 500 looking for where to launch your next CRM interface, forget it. There are safer ships to sail than this--e.g. Amazon EC2 (et. al.), Mosso, etc.; better yet, convert what you have.
If it sounds like I am being reactionary to this announcement, I suppose I am in a way. Unfortunately, I have spent a lot of time thinking about how today's high-scale business systems will move to the cloud, and I think the market needs more maturity before this can be done safely. You need flexibility of the type and architecture of your application, and which components you choose to leverage. There is no such choice with Google.
The best part of Scoble's coverage was when he talked to two developers at the end (~18:15). One (Michael Malone) notes the biggest problem is "lock-in". The woman standing next to him (Mia Culver) calls it a "proprietary platform".
I love it. There is no fooling this savvy, open source focused market. If you want to win hearts and minds, be open. When the hell are we going to get that application portability standard we've been demanding, eh?
(On a side note, the required demo for cloud application development is now to build a web app from scratch and deploy it so the audience can access it from their laptops in 5-8 minutes. Google did it tonight, and Heroku did it at the Cloud Demo Night earlier this month.)
Some more of my notes from the announcement:
Can't do:I have an interesting experiment I wish I could get to. I want to marry Scalr, the open source Amazon EC2 automation environment with a policy-based SLAuto environment to get the ultimate in flexible, open and coding agnostic autonomic operations, both in the cloud and "at home". Anyone want to beat me to it? (Come to think of it, why is Google still hosting Scalr now that App Engine is live? Hmmmm....)
Administration Console gives the ability to see and manipulate running app code (by version) and data
- No write to file system. (Reads OK, so you can use props files, etc.)
- No direct web calls (instead utilizes "URL fetch" API)
- No threads (single thread only, but distributed across multiple systems)
- Python only first language, looking for input on next language to attack (must have runtime that can be "hardened")
Is the identity environment for all hosted apps Google login? Is everyone comfortable with this?
The initial 10,000 beta accounts may already be gone.
Quota based, no ability to grow past above for now.
Also, no "offline processing" today, but looking into it for future. (Sounds like batch stuff, etc.)