I heard about this a few days ago, and I'm trying not to jump to conclusions too hastily. Google recently announced that they will delay the release of the source code for Honeycomb, the latest version of Android made specifically for tablets. How long will they delay it? No one knows for sure, and Google hasn't been very clear about it. Open source developers are understandably pissed off -- the author of that Ars article, Ryan Paul (Segphault), started an awesome open source microblogging application for Ubuntu called Gwibber that I use all the time. The reason for the delay has some merit, however, because in an attempt to get Honeycomb finished, Google stopped worrying about making sure that it would work on phones.
Google's worried that if they release the source right now, Honeycomb will be slapped onto phones or crappy tablets it wasn't meant to run on, and the user experience will suffer for it. They have an argument here, in that some of the cheap ass Android tablets out there really give Android and Google a bad reputation. If I buy a $100 Android tablet and find that it's complete junk, I might think that all Android tablets will be like that, which is not the case. Motorola may also have wanted Google to delay the release of the source code in order to boost Xoom sales rather than having people just update their current Android 2.2 or 2.3 tablets to run Honeycomb.
On the other hand, some tablets such as the dual-core Tegra 2 G-Tablet come with garbage software pre-installed, but because of Android's open source nature, enthusiasts have made custom ROMs that make the G-Tablet an excellent, cheap Android tablet. I was VERY tempted to pick one up off of Woot the other day for $285 shipped, but Google's delay in releasing the Honeycomb source convinced me otherwise. The G-Tablet's specs are pretty close to that of the Xoom, but at less than half the cost! The screen isn't quite as nice, and it has half the RAM, but it would have made an excellent, cheaper alternative to the Xoom once some XDA developers got Honeycomb running on it. Unfortunately, there's no telling when that will happen now. In the meantime, I've decided to give Apple's iPad 2 a shot.
I'm very disappointed with Google right now. I run CyanogenMod 7 (an open source, community-based ROM) on my HTC Evo, and it runs WAY better than the much slower, clunkier HTC Sense interface that came with my phone. Custom ROMs like CM7 aren't possible without the Android source being openly available. I understand Google wanting to have more control over the Android source so that the market isn't flooded with crappy products that claim to be the newest Android devices. To be honest, you can't be as confident that every Android-based device is going to be as solid or consistent an experience as it is on nicer devices like the Evo. Unfortunately, delaying or withholding the release of the source code like this also cripples the possibilities that an open platform like Android is supposed to be able to offer. The custom kernels and ROMs that are possible with Android are among the main reasons I switched to Android in the first place!
I hope this really is just a delay in releasing the source code and that it gets released sooner rather than later. If not, Honeycomb development is going to be severely hindered, and the Android tablet software scene needs as much help as possible to catch up to Apple's 1 year head-start. Until then, we have no choice but to just wait and see what the hell Google decides to do.