Well, if Apple wants to beat Google, maybe they can work with Microsoft on some projects to do so? I mean, Apple knows Microsoft is failing on producing decent tablet like the iPad 2, so, by working together, Apple can gain more customers who dislike iPad's incompatibility with MS Office files (although Pages, Numbers, and Keynote is able to read the files, some people just like the way MS Office works) and Microsoft can get money from making MS Office for the iPad (paid, of course.)
This could 'possibly' end Google docs. The only reason I used Google docs was to be able to share and edit files on multiple platform without having to export the files. If this MS Office app uses SkyDrive, then yea, I won't be using Google Docs anymore.