Google Apps is a collection of Google services like Docs, GMail, Calendar, and GTalk bundled together in a package that allows businesses to use Google's infrastructure behind their own domain. For small businesses, it's a no-brainer. I've used it and it's simple and works great.
Apps comes in two editions: free and "premier." The free edition does most of the things a small business needs, but Google's trying entice larger enterprises to take the plunge with the premier edition and leave their messaging needs to Google. At $50/year/user, it's not cheap, but many organizations can probably make a case that it's cost effective based on what they spend now.
Today Google's uping the ante by increasing the storage on the premier edition to 25 Gb (it was 10) and adding new tools based on technology they acquired with Postini. The Postini tools provide further protection from Spam and virus scanning. They also allow companies to recover lost data and manage compliance issues by ensuring users don't inadvertently violate company policies with outbound content controls.
Someone asked me yesterday if I thought Google was going to displace Microsoft. I replied that I didn't like the question because I'm not sure what it means. But it's clear that Microsoft's business is built on a software model that many--not just Google--believe is 100% 20th century. More and more companies are finding that they can turn over critical functionality--like email--to someone else and be better off.
Only a few years ago, the notion that businesses would turn over their email to a company like Google would have been scoffed at, but I hear more and more places talking about it as a serious possibility. If your company uses Google Apps (or something similar) for email, leave a comment and let the rest of us know how it's working out.
Google is showing that they're serious in courting the corporate client. While that business is small now (less than 1% of Google revenues) it's plainly a place where there could be big growth.