The Android operating system has always been based on the Linux kernel, and every version (barring Honeycomb) itself has been open source. While this might lead you to believe that the two were tightly integrated, that was not the case for quite a while. In fact until recently, Android was more like a fork of the Linux kernel that took the kernel and customized it for mobile use. That all ended with the newly released version 3.3 of the Linux kernel, which merged the changes and tweaks of Android into the main Linux source tree.
For most end users, this means very little, as the user experience on both Android and Linux will not be effected. However, for the development community, it means a few things. It will first of all make building kernels for custom ROMs easier, allowing developers to use the source of kernel version 3.3 and later almost unmodified on devices. In theory, it should now also be possible to boot Android with the 3.3 kernel on any device, provided you have the correct drivers. This should be quite helpful both for ROMs and those who wish to install Ubuntu and other desktop version of Linux on Android devices as well.
For Linux users, this could mean easy compatibility of Android apps on the desktop, or perhaps a more advanced emulator. Also, it could provide a big help to projects like Ubuntu's Android project, which uses an Android device to run a full desktop OS.
More important than the actual features, however, is the mindset this move represents In the past, there has been something of a rift between Linux developers and Andorid developers, but the merge appears to signify a detente between the two groups. Even if the current benefits are not all that impressive, this new mindset and direction should hopefully result in a more productive and collaborative future for both Linux and Android.[Kernel Newbies]