I like what I read in Revenews about Google testing the affiliate marketing model. With affiliate ads site owners won't just get paid when someone clicks on an ad. They'll get paid when someone clicks AND buys something. That should help cut down fraud.
The reason why Google won't be much of a threat is because Google is an auto-pilot model. They create things and set them free into the marketplace. They don't get too involved in the details.
Affiliate marketing is about the details. It's built on relationships. Any serious affiliate won't rely on Google. It will provide another way for web site owners to make money. But for most it probably won't generate the income that affiliate marketing does. For that you need people, like affiliate managers and account reps.
If you call Google's customer service you'll go through a phone tree then told to go to their web site. Customer service isn't what Google is about. They are plug and play.
Therefore I don't see this move as being a threat. In fact, it may help expand the affiliate market as more people become comfortable and understand the affiliate marketing model.