Their "autopilot" is basically a "driver assist" system: lane-keeping plus adaptive cruise control. Mercedes, BMW, Cadillac, Volkswagen, Ford, etc. already have that. Tesla's is rumored to be the Daimler-Benz system.

That's good enough for about 99% of freeway driving. The last 1% is a problem, which is why none of the big car companies call it automatic driving. Most of them put in systems to insure the driver keeps paying attention, such as insisting on hands on the wheel in auto mode.

We're approaching the "deadly valley" - automatic driving that's almost good enough that the driver can stop paying attention. On the far side of the "deadly valley" is full-auto driving, including automatic handling of unusual and emergency situations, which is where Google and CMU/Cadillac are headed.

The minimum safe level is probably a system that can get the vehicle stopped autonomously when it's headed into a situation it can't handle. Beeping the driver to take over is not going to work in practice. As soon as hands-off driving is available, people will use it when tired, drunk, or texting.

I'm seeing a lot of resistance to the idea of narrower city streets on this thread. The advantages of narrower city streets (and hence, crossings) goes far beyond safety. It actually enhances quality of life in a significant way. A wide, four lane highway running across your town basically says humans must come encased inside an automobile. Pedestrians and cyclists become second class citizens. It's a design driven for the convenience of cars and to the detriment of humans.

Here's a far more engaging critique of car-first design by James Kunstler: http://youtu.be/Q1ZeXnmDZMQ

I used to work on automatic driving. I ran Team Overbot in the 2005 DARPA Grand Challenge. (We lost, but we didn't crash into anything.) So I'm painfully aware of the problems of automatic driving.

You need to be both looking at the road with cameras and profiling it with LIDAR. (Or terahertz radar, once that gets going.) It's not enough to just sense the car ahead. You need to be able to detect potholes, ice patches, junk on the highway, small animals, and similar problems. We could detect and avoid potholes back in 2005. Since we were doing off-road driving, that was a normal driving event.

The reason for a high-view LIDAR is that you want to see the pavement surface ahead from a reasonably useful angle and get a 3D profile of the road ahead. Google uses the Velodyne spinning-cone LIDAR scanner, which is a lot of LIDAR units built into one rotating mechanism. That's a research tool. There are other LIDAR devices more suited to mass production. Advanced Scientific Concepts has a nice eye-safe LIDAR which can operate in full sunlight. It costs about $100K, but that's because it's made by hand for DoD and space applications. The technology is all solid state, not inherently that expensive, and needs to be made into a volume product. (Somebody really needs to get on that. In 2004, I took a venture capitalist down to Santa Barbara to meet that crowd, but there was no mass market in sight back then. Now there is.)

You can only profile the road out to a limited distance, regardless of the sensor, because you're looking at the road from an oblique angle. Under good conditions, though, you can out-drive the range at which you can profile the road. That was Sebastian Thrun's contribution, and won the DARPA Grand Challenge. The idea is that if the LIDARs say the near road is good, and the cameras say the far road looks like the near road, you can assume the far road is like the near road and go fast. If the far road looks funny, you have to slow down and get a good look at the road profile with the LIDARs.

Automatic driving systems have to do all this. "Driver assistance" systems don't. Hence the "deadly valley".

That's just to deal with roads and static obstacles. Then comes dealing with traffic.