I tend to view HTML5 applications as closer to a traditional desktop application than a web site.

Local storage has some advantages over server-based storage (latency, privacy, etc), while the major disadvantage of local storage is the lack of persistence across multiple devices.

I like the idea of HTML5 app developers being able to use LocalStorage and then seamlessly piggyback on Chrome's existing JSON sync framework. That's a lot less work than managing state on the server, and lets game developers focus more on their core competencies, effectively outsourcing the "webiness" of their app to Google.

By no means do I think this kind of "Chrome App" will replace web apps, but I do believe that in certain genres like video games there are advantages.