When you go to google.com, you'd see they are advertising this: http://sites.google.com/site/ Although the thing has been in beta since last year, I think this is the launch of final version of google sites. I feel it's going to challenge MySpace, but it'd be a great idea to go there and book your own address and create a page with backlinks to your actual sites. This is sure to get indexed properly by google soon.
No I don't think it would compete with MySpace. It is being introduced much too late for that. It seems like they are targeting group websites more than personal websites. Then again, with frontpage advertising on Google.com they are reaching a huge number of people. So we'll have to watch to see how fast this network grows.