No huge loss. I use Windows XP, at work and therefore still have to rely on Google Desktop, but my family’s Windows 7 and Mac machines include quality local PC search functions with the operating systems.
What is surprising is the speed of the application lifecycle in the dot-com age. You will recall that after just three years Google killed Google Health, losing a big bet on personal health records.
Slower-than-expected user adoption was one of the main reasons behind that demise. That can hardly be the reason for ending the reign of Desktop (though others, like Sidewiki, probably had relatively few users).
The concern here is user adoption and confidence. Google certainly wants to keep its users around, but it’s more interested in the big online plays, not marginal add-ons and perennial betas. These recent app deaths aren’t a big deal, but Google Health was. Users need to know they aren’t going to get the app pulled out from under them once they’ve made a commitment.