China has blinked in its tense battle with Google, renewing the search giant's license to use its Chinese Internet address, Google.cn.

Thus caps seven months of intrigue that started in January, when Google announced it had been the target of China-based hacking, and intensified in March when the search giant carried out its threat to stop acceding to Chinese censorship requirements. At that time, Google started rerouting search traffic from Google.cn to its uncensored Hong Kong site, Google.com.hk. For users, this meant that search terms they entered would no longer be blocked by Google, as required in China as a condition of operating an Internet company there. But some resulting search returns could still be blocked, as always, by China-based filters run by the Chinese government. This re-routing to Hong Kong caused great irritation in Beijing, which called the approach "unacceptable." So Google's most recent move was to make Google.cn a simple landing page with an unusable search field. Clicking anywhere on the page, however, still took visitors straight to Google.com.hk where they can conduct their searches.

The "extra click" was a subtle difference, but apparently all Beijing needed to save face and not take the drastic step of actually blocking Google from using any Chinese web addresses. Such blockage would certainly have brought on global condemnation over the further closure of China's Internet, which is censored, mainly by means of self-censorship by China-based companies. The question now is whether Bejing's next move will be to add Google.com.hk to its list of blocked sites. "They didn't block it after the redirect took place in March. If they wanted to block it, you'd think they would have done it then," says Rebecca MacKinnon, a China Internet expert who is a visiting fellow at Princeton University's Center for Information Technology Policy. "But they could always block anything, at any time in the future, for any reason."

While the political stakes were high for China, the corporate ones for Google were quite high as well. Last week, Yasheng Huang, a professor of Chinese economy and business at MIT's Sloan School of Business, wrote me to say that "if Google does not get this license it will have collateral damage to its other operations in China. It operates an R&D center in China and its sales team will be hampered to sell ad space on its website. It will be marginalized further. The Internet, as global and as cross-border as it is, still has geographic roots."

Google staff engineer Adam de Boor gave a keynote this morning at Usenix WebApps '10 in Boston, where he outlined a few of Gmail's next steps. The webmail application, which launched in 2004, has aggressively added new features in the years since, and is currently launching as much as one new feature a week.

De Boor said that there's currently a big push at Gmail to figure out how to take maximum advantage of HTML 5, a standard Web technology that's been increasingly adopted by browser vendors. HTML 5 allows web applications to behave more like desktop applications, and Gmail recently started allowing users to attach files by dragging them into the browser window.

In the future, the company hopes to extend that by allowing users to download files by dragging them out of the window. By improving its applications this way (and by making complementary improvements to its Chrome browser), Google plans to show that Web applications truly can do everything desktop applications can do.

The company also plans to use HTML 5 to pursue its obsession with speed. In particular, Google's experiments with HTML 5 and the associated CSS 3 show that using those technologies could speed up Gmail's load time by 12 percent.

The company has also been researching a new model for Web applications that could speed up load times even more. In experimental builds of its Chrome browser, Google has started allowing users to install Web applications, meaning that the browser keeps a page for that application always loaded in the background. This means that the Web application always has up-to-date data, and is always just a click away. When the user types the URL for the application, the browser links the user to that preloaded background page, speeding up the time it takes to get to the service.

By applying this technique to Gmail, De Boor, said, the hope is to get the webmail application to load in under a second. Google's vision for the speed and behavior of Gmail is likely to set a standard for Web applications across the board.

Within three-to-four years, Google hopes that its Apps will be more than a billion dollar revenue stream for the company, according to Nikesh Arora, president of global sales operations and business development at Google, who was speaking onstage at the TechCrunch Disrupt conference in New York City.

Google has seen huge growth this decade. When Arora came to the company in 2004, the company was pulling in about $2 billion a year. Today, Google's revenue is $24 billion. This comes almost entirely from its search advertising business, but Arora laughed off suggestions that Google is a "one-trick pony," but. "It's a pretty good trick," he said. "I love that trick." He also pointed out that search is not one trick in itself--the company has had to do a great deal over the past 10 years to serve the different categories that people search today.

Arora believes there's much more to be had from the online advertising market. He estimates that the total online advertising market is about $50 billion a year, but expects that number to grow fourfold in the next five years. Google currently owns about half that market; and Arora coyly stated the company would like to continue to "participate" in online advertising as it grows.

Arora said that current trends in startups hint at the growing importance of applications in the cloud, and he did not contradict the suggestion that Google was looking to its apps suite as its second trick. Most innovations today start out aimed at consumers, he said, and slowly make their way into enterprises. Arora suggested that Google will pick up market share for its Apps by appealing first to consumers and small businesses.