Google just bet on photo sharing by acquiring Picassa. Blogger integrated their Hello service at the time they did their re-design, so they have been working together for a couple of months now.
The acquisition makes sense:;;
Photos are inherently social, people use them to tell stories and share experiences
Photoblogs and Moblogs are the fastest growing segments of consumer blogging right now
Camera phones will outpace the sales of cameras and phones combined within five years
Partnering with a printing provider like ofoto provides a direct and immeadiate revenue stream
Picassa gives them a client to ease upload and provide organization
It gives Google a new area of expertise and technology beyond Images
Blogspace just got richer, as in social media. Keep in mind that Picassa on its own isn't social software (especially compared to Flickr), but in combination with Blogger it can be.