Great deal for yahoo shareholders. They're getting paid close to 4 times their shares would have been worth a year from now.
Ok for Microsoft. They get extra market share for now.
Awesome for users. One less mediocre product in each category. Hotmail and Yahoomail users would probably retain their email addresses, but get a single sign-on. Yahoo messenger and MSN/Live/Windows messenger would combine. MSN/Live spaces and yahoo 360 would combine. Yahoogroups would start getting more spam. Their hideous portals would combine.
Google? This should be a non event. Their path to world domination is not hindered by the also rans combining.