Hosted Business Pages are the newest addition to the AdWords arsenal -- they give businesses without a webpage a reason to advertise with the service. Currently it's only available to new businesses using the Starter Edition in the United States, but it they "look forward to expanding [this] service in the future."
In order for this to be successful, they must find a way to reach "disconnected" local businesses. For the most part, if they don't have a website, they probably don't care much about online advertising. Perhaps this is why they ended the official post about the new feature with:
"If you're already an AdWords advertiser, perhaps you'd like to tell your favorite local restaurant owner that they can now advertise online, even if they don't have a website. Just watch out for the crowds of new customers."