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The idea, according to Google, was that while email and IM developed to mimic other, already understood "technologies" such as snall mail and phone calls, respectively, interaction between people had grown to include many more alternatives, such as social network.
Why not start from scratch and try to create a new paradigm that encompasses all that the communication venues we current have (or at least try)? That's where Google Wave comes in.
A wave is when a user does some activity you might think would involve communicating with others (such as uploading photos to Facebook, writing an email, starting an IM). The similarity ends there, because you can add multiple contacts to a wave, they can comment or respond to sub-portions of the wave, and added contacts can add other contacts to the wave (unless the originator forbids new entrants).
You can also use "playback" to rewind the wave and see how it developed. Oh, and rather requiring "Enter" to be used to complete your "thought," so to speak, characters appear in real-time (although a wave can be set to require the "enter" or "return" key).
A user creates a "wave" by typing a message or uploading photos and adding contacts to the wave as they see fit. Other contacts can be added later, and those people can add other contacts to the wave unless the original wave starter doesn't allow new entrants to the wave.
But Google see this not as just a product, but as a developer platform, with three possible types of projects foreseen:
A game-changer? The fact that the presentation received a standing ovation speaks volumes. The key will be adoption. No word on when Google Wave will go live, but you can sign up to be updated here.