Just imagine ....
- writing just one app that runs on every desktop and mobile phone out there.
- apps which update entirely automatically, without any extra line of code, because they are basically just cached versions of a website.
- a designer, who just knows CSS & HTML, can make an entirely new GUI for your phone.
- an eco-system where the development of the interface (HTML) is completely separate from the kernel/browser and you can choose which kernels/rendering engine to run on your phone, independent of the user interface and vice versa.
- etc. etc.
Kudos to Mozilla for their vision and for not just developing the technology, but making a good looking prototype to demonstrate it.
However, I am a little bit skeptical that a web-based OS will perform the same as a native OS, especially in terms of battery consumption. But smartphones only get more powerful and html rendering engines only faster, so it can only be a matter of time. Also a little nitpick with respect to the title: the OS not entirely build using HTML, CSS and JS, it's just the user interface, which is just small part of the OS (compared to the kernel, etc.).
EDIT: I know most of this is already possible in principle, but the user / developer experience would be completely different.