According to the Dutch website 'All About Phones', the idea behind the update is even if the users lose their coverage for some time, they do not feel lost wherever they are. However, one cannot enter new destination in the Google Maps during the offline mode.
Google anyway has started storing maps as vectors and not as massive images. So, if the user goes offline, their phones will have no trouble due to size of the stored data.
Since the turn by turn navigation of Ovi Maps is coming on Windows Phone 7, Google Maps needs to pull something out of its hat to compete. Google Maps has been a unique selling proposition for Android platform, which may not be used by the users on a daily basis, but feels great to have when they are in a new place.
It's not really clear how strong the offline abilities of Google Maps would be, or how much data the phone would be allowed to hold. The turn by turn navigation system of Google has any way been quality, and the fact that it's free helps. The addition of offline navigation may prove to be the icing on the cake.