"While we've learned a huge amount by launching very early prototypes in Labs, we believe that greater focus is crucial if we're to make the most of the extraordinary opportunities ahead. In many cases, this will mean ending Labs experiments — in others we'll incorporate Labs products and technologies into different product areas. And many of the Labs products that are Android apps today will continue to be available on Android Market," explains Google.
It's all about focus and prioritization, the same reasons why Google Health and Powermeter were discontinued last month. Google's CEO, Larry Page, says that Google will focus on the core products (search and ads), on the products that "enjoy high consumer success" (YouTube, Chrome, Android) and on some new products (Google+, Commerce, Local).
Google was all about experimentation and launching new projects early to get feedback and iterate. Google Labs was the place where many of the most important Google services started: iGoogle, Google Maps, Personalized Search, Google Docs, Google Reader, Google Groups. Right now, there are 56 Google Labs products and many of them are really useful: Google Body Browser, Google Scribe, Fast Flip, Android App Inventor, Aardvark, Google Goggles, Google Moderator, Google Code Search.
While Gmail Labs, Google Maps Labs, TestTube will continue to exist, it's sad to see that the service that showcased Google's latest innovations will disappear.