As posted on Blogger Buzz and noted by Phydeaux3, Google has now finished the merging of Blogger photos, and Picasa Web Albums. That is just the base of the story however. If you start to look into it a little more closely, you'll see how much this helps our case, and why we love Blogger/Google so much!
All those pictures!
The first thing to notice is that every blog of yours automatically gets its own album. The album is populated with all the pictures you've uploaded using that blog. This offers a perfect interface to add more pictures, find and reuse old pictures, see what all you don't need anymore and (wait for it...) delete pictures! Yes! We all know that the space offered by Blogger isn't unlimited. If you look to the right, you'll see a '1GB (and growing)' message. Now, since it doesn't mention individual blogs, we have reason to believe that your Google account itself gives you a 1GB to store your pictures, all your blogs combined. That's not a lot of space if you think about having big blogs. Hence the ability to delete pictures becomes more important.
The next important thing, as already noted, is the pictures JSON feed. You can get a URL to 'all' your pictures via. a tasty JSON feed, which can be used to show them as a widget in your sidebar, or anywhere you see fit. This is not really helpful for a blog like mine, but if you do maintain a photo-blog, then you'll see how this comes into play. Won't it be nice to show a bunch of family pictures from your photo-blog on your main blog? :)
Those are the Blogger specific Picasa goodies. If you see their
unlimited storage (with just a bandwidth restriction 100MB/mo, which is hard to reach anyway) -- Edit: As Phydeaux3 points out, Flickr does put a restriction, which slipped my mind. But it still offers many more features than Picasa. However this sure is a move in the right direction.
Getting things together
It's becoming more and more obvious that Google is working nice and hard to integrate their various features into each other, which can move to serve a few immediately visible purposes. The blatant first one being 'visibility'. By integrating services, they're increasing exposure to all their services. You remember how Blogger shows a Google Docs integration notice when you publish? Like this:
They know that Blogger is now one of their most widely used services after GMail (or maybe the other way around), and even GMail has those top row 'corner bookmarks' thingies. So it's becoming more and more obvious what they're upto now. But hey, I'm not complaining. All this is making life much more convenient for all of us, and the only thing which I can see that's remaining to be integrated with Blogger is Measuremap (if they ever get around to doing that). They recently integrated GTalk with their personalized homepage as well, so it's an all round effort.
This is some mighty good development! :) Let's see how far and deep this goes...