As I have written previously (Stuff yourself silly - how much free lunch can you cope with?) there is nothing free on the Internet, although the source of funding may not always be obvious.  So it is with Google. 

Google has a vast source of income derived from advertising on its search engine pages.  This money can be used to fund a variety of software projects, none of which need necessarily produce any significant income.  They do, however serve the purpose of enhancing the Google brand and encouraging users to search for content via the Google search engine.

The secret here is "incremental cost."  The cost to Google of serving just one more search request; just one more Gmail account; just one more map request is infinitesimally small.  Once the infrastructure is paid for, the ongoing use costs very little (per user).

For instance Chris Anderson, editor of Wired Magazine and author of the book "Free: The Future of a Radical Price" noted that "This use of Free is part of it's "max strategy" — it uses Free to get its products in the hands of the greatest number of users, and then figures out some way to get money from them (mostly with ads, but sometimes with "pro" versions of the services, in which users can pay for more storage or features, using the "freemium" business model)."

Now, Google would want us to mentally equate both meanings of the word 'free' here – speech and beer.  The power to present the applications they see fit and the ability to charge as little (or as much) as they wish.  But what happens when these worlds collide?