A large number of Google's (GOOG) apps are available for Apple's (AAPL) iOS devices (iPod, iPhone, iPad). Google search, Google Earth, Google Maps, Gmail are just some of the better known of these useful apps. By letting these apps be available on Apple's ecosystem, Google is letting go of a potential differentiator - a potential reason for customers to prefer Android over iOS. Obviously, Google also has some interest in not getting shut out of one of the most popular ecosystems, reducing its reach.
But, as things go, this might change in the future. Apple keeps making decisions that don't treat Google nearly so well. A few weeks ago, when launching the new iPad and introducing the new iPhoto, Apple made a move: It excluded Google maps from it. And today we get another similar move. Barely two months after acquiring the app search engine Chomp, Apple is removing the option to search for Android apps.
At some point, Google will be forced to pay in kind. Apple is slowly taking decisions that always seek to restrict Google's visibility and usage, while Google is keeping hard-to-replicate options open on iOS. This practice by Google might even be directly against its own interests. Were iOS find itself without Google Earth or Gmail, its attractiveness could be severely impaired - it would depend how far Google was willing to go, though. For instance, if Google tried to keep even third parties from accessing Gmail from a iOS device, that would really present a large downside for Apple. Gmail is hugely popular and Apple's devices would be a lot less useful without it.
It's a dangerous game that Apple is playing by being so aggressive versus Google services it can replace. There are services it can't realistically do - people are attached to their own e-mail accounts and it would be a huge hassle to change them - and at some point, Google might retaliate in kind.