Google got its start being a free service backed by ads. Now Google has developed the Google Nexus One, a direct competitor to the iPhone.
See, Apple came out with the iPhone, packed with Google-developed features and technologies, and in the ~3 years it's been out, it has completely altered the face of the mobile landscape, and taken massive market share away from other competitors such as Nokia, RIM, Samsung, etc... Suddenly, Google develops a "free" smartphone OS to compete with iPhoneOS... ok, it's getting a bit shaky here, because Google technology is heavily integrated into iPhoneOS, Androids primary competition. Add to Android a whole new handset featuring many of the same physical characteristics and features of the iPhone, and suddenly you've got Google fingers in every mobile pie imagineable, while the platform developed by Apple benefits greatly by any developments from Google, which are in turn spurred by the sales of Apple products. In this case, the two companies appear to be competing, but behind the scenes, they both benefit from each other due to technology and feature sharing, giving them no real incentive to be better than one another, but giving the both of them incentive to team up and destroy the other competition, all while "competing."
In addition to that, ChromeOS is emerging as a platform.
As soon as it became evident that Google and Apple were stepping on each other's toes in this new market, they decided to part ways to avoid suspicion of operating a duopoly.
See, a monopoly is bad because one company controls the entire market.
A duopoly is worse, because two companies control the market, giving the illusion of competition and choice, while making backdoor deals to maximize profits and minimize real competition.