The shoe that Google's been itching to drop - the one everybody knew was dangling - has finally dropped.

Google said on a midnight blog post this morning that it's going to develop a fast, lightweight, open source operating system based on its nine-month-old Chrome browser to compete against Microsoft.

The so-called Chrome OS, described as Chrome running in a new windowing system on top of a Linux kernel, won't be ready for prime time until the second half of 2010, which should give Microsoft plenty of time to figure out a retort if it doesn't already have a plan.

Google's aiming to put the thing on ARM- and x86-based netbooks first and sometime after that on full-sized desktops. It says it's working with "multiple OEMs to bring a number of netbooks to market next year."

Chrome OS is not Android, the Linux-based operating system Google is pushing onto phones, although the two admittedly overlap since Android is also supposed to be fit for netbooks too. Instead it's described as a new Linux project that will be open sourced later this year so the community can contribute.

Google says existing operating systems, meaning of course Windows without saying so, were designed before the web was invented. The web and applications running in the browser - not the operating system - are central in Google's thinking. Chrome OS is supposed to get the user onto the web in seconds via a minimal interface designed to stay out of the way.

The company says it will "completely" redesign the underlying security architecture to avoid viruses, malware and security updates. It promises that all web-based applications will automatically work and any new applications written for the thing will also run on any standards-based browser on Windows, Mac and other Linux operating systems "to give developers the largest user base of any platform."

Google uses Linux internally so it can presumably make an operating system robust enough to hold up. But netbooks are not the stuff of mission-critical work; Linux has so far failed to dent Microsoft's grip on PCs, and the Chrome browser has yet to make much headway against Microsoft or even the Google-subsidized Firefox.

By Google's count it is only used regularly by 30 million people.

Google however is ratcheting up its challenge to Microsoft. Mere hours before its Chrome OS disclosure it finally ripped those perpetual beta labels off Gmail, Google Docs, Google Calendar and Google Talk.

Their beta status communicated "not yet ready for prime time" to business and has stopped CIOs from adopting - or even looking at - the widgetry, Google said. It wants to remove that reservation.

Gmail has been in "beta" for five years.

The Google Apps suite has been in "beta" for two years although that didn't stop Google selling a "premium" edition of the programs bundled with SLAs and 24/7 support to companies for $50 a seat a year, creating a tidy sideline business reportedly worth hundreds of millions of dollars. By Google's count Google Apps has collected from some 1.75 million companies around the world. It is unclear whether they all pay.

Nothing has inherently changed about Google Apps except that Google has added mail delegation and mail retention to suck up to the corporate set.

Google has never explained the tentativeness that made it keep the beta tags so long.

Google's stock was up $6 Wednesday morning to $403 and Microsoft's was off 1% and change.