When you're the "big fish" in the pond, it makes business sense to just swallow up all your smaller competitors. Buying out your competition is the oldest trick in the book, all big companies do it all the time. That's just the normal way capitalism has always operated (capture, consolidate and monopolize).
I think its more interesting to notice the companies that Google is buying. They are clearly up to a lot more than meets the eye. They aren't just buying out smaller competitors, they have been buying their way into new territories (robotics, bio-tech, finance, tech. hardware (as opposed to software), etc.).
Mike, as agilemind points out, often major tech companies buy out startups that developed technology, because it's easier than having to reinvent the wheel. Why put a team on a project developing technology X for two years when they can just buy a company that already perfected it for half a million dollars and call it a day? :)