People who refer to 'Linux' as some monolithic entity are generally people who are unfamiliar with what Linux is and how it works.
A kernel is not an operating system. An operating system is built on a kernel, but it's no more accurate to say that the kernel is the OS than it is to say that the motor is your car.
There are operating systems built on Linux running everything from home PC's to servers to routers to toasters. From the way Google Labs is describing it, Chrome OS sounds like a stripped down operating system intended to run the PC as a net appliance -- it'll let you browse and check email, include Flash and Java support out of the box and likely not do much else. By stripping down the feature set they can reduce the overhead required, and also eliminate a lot of potential bugs. It's a good product for people who just need to be able to get online, but will not (judging again by what I'm reading here) compete with things like Ubuntu or Red Hat. That it's built on the Linux kernel does not really have any bearing on the discussion, since it's not working in the same market space as a full featured Linux distribution.
On the tangent, for those who use Linux there are significant differences between the distros. I have my own preferences based on what each distro does better and what quirks they have. From the outside looking in I'll admit the differences may seem small, but that doesn't mean it's accurate to lump them all together.
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I wake up in the morning more tired than before I slept
I get through cryin' and I'm sadder than before I wept
I get through thinkin' now, and the thoughts have left my head
I get through speakin' and I can't remember, not a word that I said
- Ben Harper, Show Me A Little Shame
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