The NYTimes has a a major piece out today, For Mozilla and Google, Group Hugs Get Tricky, about the impact of Google’s Chrome on Mozilla’s Firefox.

The story is a typical can-the-new-entrant-bring-down-the-incumbent style business tale. The setup is in the new offices of the feisty David, Mozilla Firefox, that has survived and thrived despite the twin Goliaths, Microsoft Internet Explorer and Apple Safari:

“We’ve learned how to compete with Microsoft and Apple,” says [Mozilla CEO John] Lilly, a soft-spoken, earnest 38-year-old. “Google is a giant, of course, and competing with them means we are competing with another giant, which is a little tiring.” […]

Firefox has captured nearly a quarter of the browser market by focusing on speed, security and innovation. Its success is all the more remarkable because it was built and marketed by a far-flung community of programmers, testers and fans — mostly volunteers — coordinated by a nonprofit foundation. It is a shining example of the potential of open-source software, which anyone can modify and improve, and its ascent is one of Silicon Valley’s most unusual success stories.

In short, Mozilla showed the world that browsers matter. Now the challenge is to keep proving that Mozilla matters.

After Netscape’s demise and before Firefox arrived on the scene, browsers were a sclerotic sector. Microsoft ruled, security threats were pervasive, and the only innovation was towards driving traffic back to Microsoft products.

Interestingly, the Microsoft consultant quoted in the piece reads like he might be happy with Mozilla out of the picture and a more manageable for-profit oligopoly in place:

“Mozilla performed a really good service, but you have to wonder what their relevance is going to be going forward,” says Matt Rosoff, an analyst at Directions on Microsoft, an independent firm that tracks the company. “They keep Microsoft honest. But if Google is pushing innovation in its own browser, it can play that role.”

But for the moment, Google sounds content to have Mozilla in the market. Mozilla and Google have been close, a relationship greased by a deal that makes Google the Firefox browser’s default home page and accounts for the lion’s share of Mozilla’s revenue.

They’re quoted imagining a world without the elimination of Mozilla:

“Mozilla has done an amazing job,” says Sundar Pichai, a vice president of engineering at Google who heads the development of Chrome.

Mr. Pichai says that because of Mozilla’s vital role, the company thought long and hard about the impact Chrome would have on Firefox. Google eventually came to believe that it could help spur even more innovation in browsers by building its own, he says. And it made Chrome open-source, so any advances it makes could be adopted by others, including Mozilla.

“We were all very clear that if the outcome was that somehow Mozilla lost share to Google, and everything else remained the same, internally, we would have been seen as having failed,” Mr. Pichai says.

I don’t know if such a thing — innovation without outright, old-style, competitive creative destruction — is really new or will come to pass. I only know I wish it would.

RELATED: When Mozilla released the new Firefox 3.5 on June 30, the number of downloads occurring approached 100 a second. They hit 5 million downloads in the first 24 hours. Right now it is still about that. You can see for yourself here.

Read/Write Web has a review of Firefox 3.5 that concludes:

Overall, the latest upgrade to Firefox is definitely worthwhile and filled with improvements that will please its users. With its new features, speed increases for web apps, and support for standards, 3.5 represents a major upgrade, not a minor release.

A vulnerability was confirmed on July 15, a fix was released on July 17, and Mozilla says it was a bug not a security threat.

Mozilla has mapped out plans for Firefox 3.6, scheduled for 2010. Ars Technica has a look at that:

Mozilla has unveiled its roadmap for Firefox 3.6, which is codenamed Namoroka. This version, which will follow the upcoming Firefox 3.5 release, is expected to arrive in 2010. Mozilla has some highly ambitious plans for 3.6, including a new task-oriented user interface paradigm and deep integration of Prism-like rich Internet application functionality.

You can get Firefox 3.5 here.