This means they are trying to integrate wave into google docs. It baffles me that they didn't run with this headline instead: "Wave is being integrated into Google Docs." This would have been much better publicity than just pulling the plug and declaring Wave as dead.
Wave always made more short-term sense as plumbing to unify google docs/notebook/chat/mail/etc.
Having, say, robots watching/operating on Google Docs and Email would be a huge feature advantage that competitors would have a very hard time catching up to. And you can offer that to users without trying to force them through the gauntlet that was the unified Wave interface.
And, years down the line, when people are ready and the unified interface was polished, you could bring it back for people who want it.
In the cases where I've been on projects that successfully used Google Wave, it was always as a coordination tool to google docs...basically a content management tool with pointers/links to individual docs...on occasion as a file repository as well.
Wave isn't being fully integrated into Google Docs. There's a large feature overlap, but the two products use different implementations of operational transformations (the heart of Wave's "liveness") among other things. Ideas from Wave may be included, but the core technology is not going to replace the core of Docs.
Wave in a Box is an open source project, not a google service. That's what the Wave team is putting most of their effort on. Next year, it seems like most will be moving onto other Google projects unrelated to Wave. I'm in a coding session at the Wave Protocol Summit right now, and everyone's focused on federating Wave in a Box servers together. I'm working on a RaphaelJS Doodad. Doodads are new-- they're extensions to the Wave editor. So you basically get to use the Wave Protocol to collaborate on structured data with a custom interface (in my case, SVG graphics).
One major concern is what happens to our precious google waves, so the export feature from GWaves -> Wave-in-a-Box is a big deal.
If Wave wasn't associated with such a disastrous public perception, there could be a viable market for customized, hosted enterprise Wave instances.
The rub would probably be finding that niche group that A) has made Wave an important part of their workflow, B) is incapable of instantiating it on their own, and C) hasn't, since hearing the news, already found another solution to replace Wave.
This means they are trying to integrate wave into google docs. It baffles me that they didn't run with this headline instead: "Wave is being integrated into Google Docs." This would have been much better publicity than just pulling the plug and declaring Wave as dead.