I’ve seen a bit of uninformed chatter on this, so let me add my own uninformed 2 cents:

First, I think Google actually does want the web to be faster and better. They recognize that the web is their platform and any improvement to it has an eventual benefit for them.

But Google DNS also provides other benefits. It’s true that there is an advertising opportunity in hijacking mis-typed domains and displaying ads against them, as OpenDNS does. This is potentially a large market – domain squatters, for example, make a tidy living doing something similar. I don’t think Google will actually do this. At least not anytime soon – it’d just be too creepy coming from Google.

What Google is really after is data. In particular, traffic and usage data.

By using Google DNS you effectively tell Google exactly what sites you’re visiting, when. Google gets access to your browsing patterns without having to install a toolbar or spyware on your computer.

How valuable would usage data be to Google? Knowing exactly what sites you visited, when, and how frequently?

Extremely valuable. They could use this information to develop refined models of your interests and behavior, and use it to better target ads to you. Nice.

However, their privacy policy states that they won’t do this.

What they will do is use the data to form a better model of the web.  They’ll know, for example, how popular sites really are and how much traffic they get. They’ll also be able to build user and browsing pattern models – eg. people who use facebook are also likely to use sites X, Y, and Z. They’ll use this data to improve search and advertising.

Look for Google to start offering its DNS services for free to internet provides, corporations, or anybody else with large amounts of users. Instead of paying ISPs for access to their usage logs, now they can get their own, and it’ll only cost them the overhead of running a large scale DNS service.

Peter Norvig’s message has been that more data trumps better algorithms. Google DNS is a beautiful way for Google to get a tremendous amount of data with very little intrusion while looking (and behaving) like saints.