Google isn't entering this market though; they're already in it. This is merely rebranding a feature of Docs as its own product. Which makes sense, because files are not a subset of documents, documents are a subset of files. This probably has more to do with Larry Page's emphasis on product focus.
And I don't think this kills Dropbox at all. This is classic capitalism. Dropbox's competitive advantage is that they can completely focus on cloud storage, whereas the Google team is likely working on a half dozen or more other projects simultaneously. Dropbox is already tied into many apps, and has excellent features such as the ability to run your website from it. This does mean that Dropbox has to improve their efficiency to drop prices; they don't have to match GDrive but they have to come close.
And I don't think this kills Dropbox at all. This is classic capitalism. Dropbox's competitive advantage is that they can completely focus on cloud storage, whereas the Google team is likely working on a half dozen or more other projects simultaneously. Dropbox is already tied into many apps, and has excellent features such as the ability to run your website from it. This does mean that Dropbox has to improve their efficiency to drop prices; they don't have to match GDrive but they have to come close.