Google Gears was a plugin for modern browsers that gave developers a great way to bring their web applications offline. An example of this would be offline support in Gmail -- where you would be able to basically use the service regardless of your internet connection status. Unfortunately, this is the end of the road for the feature.
Pulling the plug, is the responsible thing for Google to do, though it's not going to be popular. Browsers are natively beginning to support new web standards, like HTML5, that basically make Google Gears functionality extraneous. Keeping such a product alive simply adds unnecessary fragmentation.
Why won't it be popular? There are lots of companies that embraced Google Gears. They spent a lot of time and effort developing applications that take full advantage of the plugin -- and now it's being discontinued. Google will support Google gears, but it doesn't sound like there will be any active development on it.
It will be interesting to see what kind of feedback we get from this move from developers!