I have a big issue with having to be connected to the Internet to watch my videos.
Once the Google Video Store was launched I tested it out.
I believe Google is trying to make it convenient for the user to download and view the video. Instead of having to download the video completely prior to viewing it, Google allows viewing as the download is in progress (i.e. progressive download). Once it is completely downloaded to the user machine, it can be viewed at any time in full, and no more downloading occurs.
This is a little diffferent than iTunes for example, where the user must download first, watch second.
In my opinion, the Google video player is nice and I like the fact that you can integrate videos into html pages via the "put on site" link.
All in all, it's not glamourous, but I imagine the video store will develop into something great over time.