According to this recent piece from Ars, it almost seems as if the Instant-on Linux vendors are in no real dire straits over the announcement that Google was to a degree, entering the market with a product of their own.
Without giving away too many specifics, it seems like the various vendors out there are confident that they can compete with anyone new to the industry and do so by providing more overall value in the long term. Do more, do it better, etc.
So where does this leave Google’s Chrome OS? Frankly, being it has not even been released yet, it’s almost a moot point. And even once it is released, I suspect that they will find an OS industry that has had a tremendous amount of time to prepare for anything they can throw at the world.