At first glance Google Wave may seem like some sort of bizarre techno-beast cobbled together from various bits of familiar Internet services. Invariably, you'll find aspects of Twitter, Facebook, Wikipedia, Google Docs, blogging, e-mail and instant messaging. This makes it hard to describe what Wave actually is, but what Google is trying to accomplish is something quite directed.
Wave's objective is bold: Combine popular Internet communication methods (like e-mail and instant messaging) with the Internet's many collaborative tools (like blogging and word processing) and wrap it all in Google's signature simplicity. Google Docs users have already seen some of these features in action, including real-time collaboration and instant messaging on documents and spreadsheets. Users, however, won't be familiar with other real-time features like translation (yeah that's right, someone writes to you in Chinese and you see it in English) or context checking (The "bean soup" example: I would like been soup. Corrected to, I would like bean soup.).
Under the hood geeks will find a lot of neat technologies being utilized including HTML5 (the anti-Microsoft crowd can commence their snickering http://en.wikipedia.org/wiki/Web_standards). The Wave protocol is entirely federated, meaning individuals can create their own "Wave" servers to speak to others. In this way, Google is not solely responsible for maintaining dedicated Wave servers, no different than how e-mail operates today.
Where Wave could go is entirely dependent on what developers are able to create. The service is open-source and Google expects developers will make short work of creating fresh solutions through Wave.
If you haven't already, check out the developer's preview at wave.google.com. If you want to skip to the demo, it starts around 7:30.