Google stated pretty blatantly that Chrome OS is basically a web browser built as an operating system. It is being designed to be installed on netbook computers and will only give access to the Internet and the associated applications. Files will not be stored on the local file system as we know it today. The only local storage will be as a cache. All files are permanently stored on the cloud.
The devices that will have Chrome OS installed on them will be, according to Google, companion devices. Most people will have their traditional, full-blown desktop machine or laptop and a Chrome OS netbook. The netbook will be useful for the times you are out and about and want to quickly access your email, Twitter, Google Apps, etc.
There is a good reason for this, again according to Google. They want to create an experience with the device whereby if you happen to lose it, it breaks or gets stolen you can just pick up a new device, login and all that data is still available. Also, with no local applications they can also make the OS more secure. If there is an application running that shouldn't be there, and by default there should be no apps apart from what is included on purchase, then Chrome OS can reset the entire device. Again, all your data is stored remotely, so you lose nothing with a reset, just a local cached copy.
These features, while a great idea, mean that Chrome OS is by no means a replacement for your current desktop operating system. There are just too many things that need a desktop application that the cloud does not yet provide for. But if you're an online connected kind of person you will find use for it.
What Chrome OS may do, however, is start to push people toward the cloud a bit more. If you use a Chrome OS device, you will need to make sure your documents are stored somewhere that would be available to you over the Internet. And, if you do start storing and even working on all your documents and work over the Internet from your desktop machine, only then will Chrome OS look like a viable alternative to your current desktop OS.
This is a very clever tactic by Google, because, while the world isn't ready for running everything off the Internet right now, Google's business is the Internet, and by releasing an operating system that starts pushing people towards trusting and utilising the cloud for everything, they are inexorably increasing their reach and possibility for providing web based services to .... well everyone. Extend that a little further and this means big money potentially for the Internet giant.