It's not bad for beginners. I recommended it to a friend of mine who needed to build a small portfolio website and the service google offers helps makes it simple. It's more or less just a website builder with basic templates that can be edited.
Google App Engine is quite a bit more powerful than a website builder with a few templates. For example, this page is someone's documentation as to how to set up a stack ready to run a full-blown Drupal site on Google.
It's by no means intuitive or technically trivial to do, but if Drupal can be run then most sites can be.
Google's main competitor at this point will be AWS, rather than bespoke hosting providers. It shifts the market though.
What Google calls hosting is not quite the same thing that most people call hosting. Google calls their hosting service "App Engine". You can host standard PHP applications in Google App Engine, but it take a little bit more work to get things working.
For example, you can install WordPress in Google App Engine, but you would need to use Google Search to find a detailed step by step article about how to do it. And even after you follow those steps, it is still possible you will run into WordPress plugins that don't work properly in Google App Engine.
At this point, Google App Engine is no greater threat to industry standard cPanel style web hosting than Microsoft Azure. That could change over time, though.
I tried the Google App-Engine... I got as far as downloading Python and setting up a simple PHP echo test.
PHP on the app engine is still in a beta phase. There are a few steps to follow, and they're not well explained. However, once you're set up, it shouldn't be too hard to load a simple site, or even to set up a wordpress site. Keep in mind that for now it is a developer's oriented service, and you will have to manually upload everything, and put it all in the right place.
If Google simplifies the process, then it will be a real game changer in the hosting arena.