It does seem that the overwhelming response to this decision is negative, bordering on disbelief. I can't help but suspect this announcement is not intended to be followed-through on, but is perhaps a bluff to force a resolution to the h.264 issues with browsers.
If Google push ahead with this, they will find zero enthusiasm for WebM. Like a poster has already said, people just want something that works well and reliably. H.264 works. It's been adopted by major film studios etc. to boot; it's here, it's accepted, it's used by the pros who matter and, crucially, it works on all mobile devices right now.
Every user of Chrome has at least one other browser on their system. If they find themselves constantly being told they are missing a plug-in when they encounter H.264, they'll just switch browsers. They knew how to switch to Chrome, they know how to switch back again... If they start reading 'This site is does not support Google Chrome, please use another browser', and they will see that written by a lot web developers, then Chrome will garner a bad reputation fast.
As for Flash, I really will cheer the day Adobe discontinues it. I loathe it. As someone has said, Apple didn't decide not to support Flash in 2007, THERE WAS NO MOBILE FLASH TO SUPPORT. I regularly browse the BBC website on my MacBook Pro with some serious power under the hood and Flash crashes perhaps 60% of the time when running videos in their default wrapper. It works fine with iPlayer to be fair (which I just read is based on H.264, maybe that's why it's more stable? My iPhone can run iPlayer content...), but it's always the Flash plug-in that crashes. I can honestly say it's far and away the piece of software that crashes most on my mac and yes, Adobe, that's your responsibility, you're the authors of the software!
Steve Jobs has labelled Adobe 'lazy', and I tend to agree. It took three years to come up with a version of Flash that Apple could even take a look at using on iOS, and it looks pretty poor so far on Android. With HTML5, Flash isn't needed any longer, it is as simple as that. Sure, developers need to learn new tools but that's part of life in the software business.
The tick-box "yeah, we support Flash on our tablet/phone" marketing we're seeing really irks me. No mention is made of poor performance, of battery consumption, or of the fact that Flash's very existence is bad for every user of the internet.