While this is certainly an interesting development (especially the combination of Analytics-Adwords-Checkout can be of huge benefit for webshops), I am not going to jump in head-over-heels.
I found this posting by an ex-PayPal employee that outlines why Google Checkout may not be a better solution than PayPal. Sure, he's not completely impartial, but his reasoning seems very sound. The rest of the blog is a very, very interesting look in the kitchen of moving money around via the internet, certainly not the ravings of a rabid fanboy.
I have decided to stay out of Google Checkout for now, and see how people are talking about it six months from now.
(*): Remember how GMail was the 'Hotmail Killer'? Or how Orkut was the 'Facebook Killer'? Google's services outside of their core business certainly haven't killed any competition yet, and I don't think it's going to happen now either.