Okay, I'm assuming you know what's happening with Google in China. If not, I'm sure you can google it.
And that's what's happening, really. See, people in China don't google it. While in the North American market you're ability to google can mean the difference between business success and being an also ran. In China, Google only controls 16% of the search. And they've been trying hard for many years.
And, Google took a big hit when they agreed to China's restrictions on censorship.
And, Google is spending a large amount of money to operate in China.
And, domestically, Google is taking a hit from the Google Books thing.
So, just what do they have to loose? And what are they gaining? Yep, they get to rebuild their image of "Do no evil" while cutting costs, and not really losing that much.