Although it's technically running the Linux kernel, I personally would not consider it a free (libre) operating system as sold on most of those devices. I'm sure Linus is proud, but this seems like more of a win for Google than for the Linux community or free software in general.
It's not "technically" running the Linux kernel, it IS running the linux kernel. It's also using most of the standard GNU tools - bash, etc. You can open a shell on a rooted android device and use it much like any other distribution. This is a huge win for Linux.
Assuming, of course, that you can actually root it.
"This is a huge win for Linux."
Is it? What was won, exactly? If we are not seeing a more vibrant free software ecosystem as a result, then we did not really win anything. The prevalence of app stores, the number of Android devices that are difficult to jailbreak or for which no jailbreaking tools are available yet, and the partitioning of "users" and "developers" in the Android ecosystem are not positive things for Linux or for GNU.