At his talk during the Web 2.0 Summit, Google CEO Eric Schmidt confirmed that the next release of Android (version 2.3) will arrive in a few weeks and Chrome OS will officially be out in the next few months on Intel and ARM-powered netbooks. He also added that Android is tailored for mobile devices with touchscreens while Chrome OS is primarily designed around something with a keyboard (traditional computers such as PCs, netbooks, and laptops), according to Mashable. That's not to say that Android devices can't have keyboards or that Chrome OS can't do touch; it's just a generalization to explain the main differentiator.
Given Android's popularity and rapid growth, Google's strategy is an odd one. Android has a browser built on the same Webkit rendering engine as Chrome OS. It also offers access to over 100,000 apps in the Android Marketplace. Some of these use the Internet and others are native to the device. Chrome OS, on the other hand, is all about the Web. Essentially, it's really an OS that loads a browser. Since all apps are web-based, aside from some local caching features, the OS pretty much requires an Internet connection. It would follow that Chrome OS is aimed at smartphones and Android is for netbooks, but somehow the opposite is going to happen.