Google Wave was a revolutionary new product that would replace your instant messenger, email and collaborative software suites all at once. It was going to be awesome... but it never quite got the support I'd hoped it would.
What it could have done was handle your email, and communicate with all your instant messenger friends and manage your tasks and calendar. What it seemed to do instead was try to compete with them. Surprisingly (sarcasm) it didn't catch on. Shockingly enough if you tell people that they can replace the email and the instant messenger and the document management system they have with something new in their company (only?!) that will force everyone to learn something new, they don't jump at the opportunity.
So Google is shutting the project down. But that doesn't mean it is really dead. You can check out Apache Wave or Walkaround (which runs on the Google App Engine) and see the versions of Wave that still live.