Google's clearly interested in robotics, DoD, etc.; my guess is that this exit is for cultural reasons. Honestly, surprised they just didn't shutdown the company if things aren't going well.
My experience in this area is quite limited, but it's surprisingly difficult to find companies doing this type of research that are not tied to the DoD in some way. DARPA is a major source of funding for these projects, and many of them wouldn't get funded at all without the government.
http://www.defensenews.com/story/defense/innovation/2016/03/...
The contracts that Boston Dynamic had with DoD expired in March 2015 [2]. My guess (BIG UNEDUCATED GUESS) is that the DoD doesn't take too kindly to its contractors not renewing its contracts and these military contracts contradict the corporate culture of Google. What's interesting is that they sold Boston Dynamic exactly a year after the DoD contract expired (donning conspiracy hat).
[1] http://www.nytimes.com/2013/12/14/technology/google-adds-to-... [2] http://upstart.bizjournals.com/companies/innovation/2015/01/...
http://www.reuters.com/article/us-usa-military-innovation-id...
Being that they were the source, best as I can tell.
summary: Schmidt joins board to help an "alphabet" US govt agency or two modernize their operations with industry best practices
editorial: This could be good or bad, depending on how things turn out. And for your weather forecast, it either will be rainy tomorrow, or it won't.
hn-cross-ref:
https://hn.algolia.com/?query=www.reuters.com%2Farticle%2Fus...
You may burn some bridges in your example but think of DoD like any other organization. If it's not getting the spotlight, there will be no hard feelings when things turn.