Of course it is, it's the motive behind everything G does (well, that and making $$ - which go hand in hand).
I'm sure that is a large part of it, but also building brand awareness is another. All in all it is a great product for those that havent used it yet.
I get more clicks for Picassa than I do Firefox now, as well as more conversions (dosh). I no longer display Firefox ads to Firefox users, while IE users will be shown a random one of those two. I actually use Picassa myself, and I would recommend it to others even without the referral program. It's got some nice features, and has a slick interface. It does a good job of exporting my images to my website too. Cryo.
Pretty much any search engine tool asks you to use their search engine as your browser's search or homepage (download MSN or Yahoo toolbars for starters). Definitely not exclusive to Google, and not the reasoning behind Picassa's referral program.
Really, then what is? Google is paying upto $1 per referral for each download of picasa, a free software.
@JC: so what if it is their motive? What's your point? As JenStar said, getting their brand name far and wide is worth them paying *you* for it.