The apps are hosted by the publisher. You can also create a fully offline installable app, which is all the files of the app plus a manifest in a ZIP package.
But to be unfairly brief, anything that requires a download to run offline, or requires publishers to "upload" their apps is a step backwards. Since all that entails is literally running a desktop app. There's nothing there that couldn't be done 10 years ago, the only difference is that the apps have to be written in web technologies or not, using NativeClient. In my mind this is a step backwards, and essentially an unnecessary end run around the web solely for the purposes of monetization. I'll fully elaborate in an upcoming blog post tentatively titled "1 step forward, 2 steps back".
"Many installable web apps are hosted apps—normal websites with a bit of extra metadata. You can build and deploy hosted apps exactly as you would build and deploy any web app, using any server-side or client-side technologies you like. The only difference is that you must provide a small manifest file that describes the app.
If you want your app to work especially well offline or to be tightly integrated with the Google Chrome browser, you can create a packaged app. A packaged app is just a web app that the user downloads. Packaged apps have the option of using the Google Chrome Extension APIs, allowing packaged apps to change the way Chrome behaves or looks."
Standard web development has it's own support problem (browser discrepancies). But that pales in comparison to what supporting all of these store platforms would be like.
I want Firebug installed locally in Firefox (or better yet integrated directly into the browser like Chrome does). I don't want to download a bunch of Javascript every time.
Here's the developer guide for more on how it works under the covers: http://code.google.com/chrome/apps/docs/index.html
Quick Note: https://chrome.google.com/webstore/detail/mijlebbfndhelmdpml...