Sounds like a great idea. Most folks don't back their stuff up, especially the ones that really should because they are not careful and get infected with viruses etc. If it's easy to do, there will be a lot of demand for this service. The only issue I see is that most people have a pretty slow upstream connection, so if they want to back their stuff up it will take forever.
Of course if Google is smart, they could make the software such that it would do the uploading in the background while you continue doing whatever you're doing. As long as you're on broadband, it could keep going all night and all day without interfering with your regular stuff. The software would then have to be smart enough to do incremental backups instead of backup up everything again.....
Personally, I don't trust any company with my information, so I'd simply encrypt everything before uploading it. Truecrypt for the win!