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I've seen figures that suggest that about 25% of total internet usage is actually Facebook (not talking bandwidth, the champ there is Netflix). That 25% or so is unavailable to Google, so there is a lot of information that up to this point has not been indexed for searches. Of course, the question remains how much of that content is relevant to people who are doing searches on the antics of Lola Belle the cat. There is also the possibility of a backlash from people who don't really want everything they like to be searchable.
That said, it does pose a potential threat to Google search when combined with Bing, assuming people want "personalized" search results. This is something that Google is integrating with Google+, incidentally, but as Christopher Nerney pointed out, Google+ hasn't achieved nearly the penetration of Facebook at this point. One thing that will be difficult to overcome is the face the Google is a synonym with search, and for many people it is ingrained to use Google to search. We will see if Facebook can change that, but I don't think it will be easy.
As for Google keeping things free, I expect we will continue to see some of those free offerings become paid over time anyway. Don't forget that just happened with Apps for businesses.