As the official Google Base Blog points out, users found it difficult to find the link to perform a bulk upload -- even though it was directly below where they ended up clicking. The two links were very close together, but choosing the appropriate path was still inconvenient.
The reason for this has to do with "satisfice" (hybrid word that combines "satisfy" and "suffice"), a term coined by Herbert Simon that describes how users tend to use the first "good enough" solution. On a poorly designed site, users often end up on a wrong or inefficient path.
The new design is much better because each of the two options are equally prominent. This is important because now users have a clear choice rather than than an obvious "recommended" path. Don't get me wrong, recommended paths aren't a bad thing -- they are good in certain situations.
Hopefully Google is putting as much thought about usability into all of their products. Even though most of their services are "simple", there is a lot of room for them to improve. Check out the Google redux by Andy Rutledge for a taste of how he envisions the Google homepage.