Google addressed the recent news that Google employees were all given Google Phones, saying that it's actually a part of their product testing program called 'dogfooding' (from eating their own dogfood) that allows Google employees to give feedback and suggestions to Google's own products. In their words:
We recently came up with the concept of a mobile lab, which is a device that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities, and we shared this device with Google employees across the globe. This means they get to test out a new technology and help improve it.Unfortunately, because dogfooding is a process exclusively for Google employees, we cannot share specific product details. We hope to share more after our dogfood diet.