Update: A Google spokesperson also acknowledged that Google was awarded 50,000 seats as part of the deal.
Neither Microsoft (along with its bidding partner Dell) nor Google is actually getting paid for any of these seats until they start selling them into commands. Today's announcement is the commencement of yet another contest between the two office-service rivals.
Any U.S. Department of Defense (DoD) service or agency can go with Office 365 or Google Apps under this new Blanket Purchase Agreement (BPA) without any additional competition required. Under terms of the deal, from what I've heard from my contacts, Microsoft and Google both can sell into different commands in varying amounts, up to 50,000 seats each.
I believe Microsoft will be fielding its Office 365 for Government SKU — the one which allows government agencies to deploy Office 365 in a controlled, locked-down environment — as its entry in this competition.
A new blog post by Microsoft's Curt Kolcun, Vice President of U.S. Public Sector, doesn't specify which Office 365 SKU Microsoft is using. Instead, it notes that Microsoft will be fielding "Cloud Services, including e-mail and calendaring, Office Web Apps, unified capabilities like Microsoft Lync, and collaboration tools like SharePoint."
Google is going to be pitching Google Apps for Government, a Google spokesperson confirmed, via the following statement:
"The U.S. Army will provide Google Apps for Government to an initial group of 50,000 Army and Department of Defense personnel. This effort is part of the U.S. Army's program to use commercial cloud services to improve collaboration, information sharing and mobile access for the men and women who serve our country. We look forward to working closely with the Army on this project."