I think the "eradication" of passwords is a long way off as many people may not have the access or funds to even get this little USB dongle- and I can almost bet that the initial price will be $$$$. While I suspect it is probably a good direction, I can't help but think this is just another way for Google to rake in money for themselves.
I'll reserve judgement until I see how this works out. No matter what anyone comes up with though, it won't be long before anyone can figure out a way around it, through it, into it and hack once again.