We knew that Google was going to get into the business cloud game, and it has announced its Amazon competitor, “Compute Engine” today at I/O.

Touting results from its AppEngine product, which Google claims supports over 1 million applications, and some 7.5 billion hits per day, the company descrbied Compute Engine as providing Linux virtual machines, on ‘Google Scale.’ Given that the company provides services to hundreds of millions of people around the world, that’s a big claim.

Google claims that its product is 50% cheaper than competing products. It was very much expected that the company was going to launch this service, to fight back against offerings from Microsoft, Amazon, Rackspace and others. Google claimed that it has spent the last 10 years lowering the price of computing, and wanted to ‘pass on’ those savings to developers.

The product is available in limited preview, starting now. Just for fun, Google showed 600,000 cores working in unison to execute a single application, after showing it working with just 10,000. The speed change was remarkable. The company noted that for apps that don’t require much data I/O, many more cores can be used. The following image is from that demonstration:

Screen Shot 2012 06 28 at 12.48.03 PM 520x261 Google launches its official distributed computing offering Compute Engine