When the iPhone was announced in 2007, they realized that on-screen keyboards and multi-touch control were the future, so they did a complete redesign, moving to an interface similar to the iPhone. Here's a quote from one of their engineers talking about the iPhone announcement:
“As a consumer I was blown away. I wanted [an iPhone] immediately. But as a Google engineer I thought ‘We’re going to have to start over’” Chris DeSalvo said. “What we had suddenly looked so… nineties. It’s just one of those things that are obvious when you see it.”