Google Now Hosts Open Source Libraries
The thing is, what if multiple sites are using Prototype 1.6? Because browsers cache files according to their URL, there is no way for your browser to realize that it is downloading the same file multiple times. And thus, if you visit 30 sites that use Prototype, then your browser will download prototype.js 30 times.
These issues aside, Google's offer does seem to be quite useful for sites and developers alike, reducing memory and bandwidth usage without reducing site flexibility at all. It will be interesting to see how many sites take Google up on their offer, and how positively it will affect users.