Waymo sees its technology applying to numerous areas, including ridesharing, trucking and personally-owned cars. It could also be licensed out to car manufacturers, Krafcik adds. Also, there's an emphasis on real-world improvements, such as a more comfortable (that is, less jarring) experience for passengers and support for driving in heavy rain and other harsh road conditions.

The move isn't exactly a shock -- there have been rumors of Google spinning out its self-driving division for roughly a year. Still, it's an important step. It's an acknowledgment that driverless tech has matured to the point where building a sustainable business around it isn't just fantasy. Also, it's no secret that Alphabet wants to see a better return on investment from its many experiments. The creation of Waymo should light a fire under the self-driving team, giving it a stronger incentive to make money and show that its research has tangible benefits.