Legal challenges and royalties aside, Google's official stance on Android has long been that it's open and free. And yes, by some definitions of the words "open" and "free," that's true. Anyone - any individual or company - can simply point their browser to the Android Open Source Project, download the source code, and use it however they please. They're very upfront about it: "Here you can find the information and source code you need to build an Android-compatible device," AOSP's home page reads.
The practice of successfully building and selling an "Android-compatible device" is much different than the theory, however. First off, there's the fact that Honeycomb has never been open-sourced. Android's public repositories cap off with Gingerbread, which puts independent tablet makers in a bind. Secondly, as I alluded to before, royalties on Android devices are essentially taking the place of licensing fees at this point - you can't actually use Android for "free" on a commercial device without attracting attention from Microsoft's lawyers.
But third - and this is key - Android is significantly devalued as a consumer platform if you don't have Google's blessing to ship your product. You lose the suite of Google services that users are automatically expecting when they take your device out of the box, including Gmail, Maps and the official Android Market. It's been said a thousand times before that a vibrant, easily-accessible ecosystem of third-party apps is central to a successful mobile product - and if you lose the Market, you lose that ecosystem. Independently-launched devices (particularly tablets) have tried to make up the difference with their own aftermarket app stores, but when "success" is measured in hundreds of thousands of available titles, there's simply no substitute for the real thing.
Or is there?
When the Amazon Appstore launched in March of this year following a lengthy, low-key test with developers, it was immediately evident that the company had an opportunity to challenge the official Android Market's dominance in a way that no one else had been able to do. First off, Amazon's constant visibility to consumers is through the roof. In fact, you can count on one hand the companies with enough gravity and organic dominance to create a successful platform for software developers to showcase their products (remember Google chairman Eric Schmidt's "Gang of Four"?), and Amazon - with its nearly global dominance in online retail and its prior experience creating content ecosystems through Kindle - is unquestionably on the list. And naturally, Amazon's perpetual free-app-a-day promotion is a huge draw to the bargain hunter in all of us. Indeed, the Appstore single-handedly buried AT&T's stubborn policy of blocking sideloaded apps on its branded Android devices - and if that's not proof that there's momentum here, I don't know what is.
Initially, I'd figured the Appstore wouldn't be much more than a way for Amazon to earn a little coin off the booming, highly profitable mobile app business. Instead, they've picked the very lock that Google uses to control Android. By creating a legitimate Market alternative with over 10,000 apps (at last count) and the full backing of the Amazon juggernaut, Jeff Bezos no longer needs a thing from Google. And here's the craziest part: on the strength of the entirety of the Amazon ecosystem - Kindle, Whispersync, and so on - the Kindle Fire will be the greatest and most popular Android-powered tablet ever created. By miles and miles and miles. And it'll happen without Google's blessing, without Andy Rubin's blessing, without the Android Market.
Amazon now stands poised to take one of Google's most critical assets - Android - and turn it against them. Praise for the Fire's deeply-customized version of Android 2.3 has been nearly universal, and make no mistake, there's no going back; this is Amazon's operating system now, built atop a road-tested core that Google served up free of charge. As Nilay notes, the Fire is all about consuming media - it's not a tablet designed for general computing - and as such, I don't think that it competes head-to-head with any Honeycomb tablet on the market today. That said, it certainly sets the stage for Amazon to move deeper into mobile hardware in the coming years - and if I were Google, Apple, or Microsoft, I'd go ahead and assume that's exactly what's happening (in fact, the rumor mill already has other tablets in the pipeline). After all, it wasn't long ago that we thought it was preposterous that a search engine might create a phone popular enough to take over the world; it's no more preposterous to think that the world's largest online retailer could do the same.