That certainly means they miss out on a lot of awesome programmers though - I work with absolutely stellar people who are college drop-outs, and have fired people with good degrees who did not perform.
At least Google's policy gives start-ups more room to find amazing people.
It's not the normal path, and you need to fill that blank in your resume with interesting personal projects and work, but Google is perfectly willing to hire designers and engineers without degrees. We do it all the time.
I graduated college with a CS degree. My college CS friend did not. I am not a professional programmer today. My friend is Hampton Catlin, the inventor of Haml and Sass.
Over-generalized moral of the story:
People who have the patience to get a degree, aren't impatient enough to invent web changing technologies like Haml and Sass.
Over-generalized, indeed: http://www.w3.org/People/Berners-Lee/