The real story wasn't a bad one -- you have to download and install the JRE in order to run Java apps in Internet Explorer, and in future the install will offer you the option of installing the Google toolbar. That's a win for Google, and the alliance with Google is a win for Sun.
But it's not the major take-THAT-Microsoft kind of story it might have been, something that would have given a boost to the OpenDocument format supported by StarOffice and built on the state of Massachusetts recent rejection of Microsoft's contention that its OpenDocument XML is an open format.
As I wrote in my e-mail newsletter this week, Microsoft continues to cling to a strategy that "proprietary" is good in the face of all the evidence. I'm in favor of anything that advances the OpenDocument format and makes it easier for people to exchange files. I suspect that in spite of yesterday's bland announcement the Google toolbar isn't the real goal of the Google/Sun alliance. Microsoft Office is a cash cow. If Google and Sun could collaborate to put a crimp in that revenue stream it could have a real impact on Microsoft's ability to carry the fight to Google on search and Web-based apps. As announcements go the toolbar wasn't exactly the shot heard 'round the world, but it may have some echoes yet.