Google is incrementally eliminating the distinction between the online and offline world. Pretty soon, the concept of offline won't exist anymore -- everyone will be thought of as online all the time.
But there's no place for old-style instant messaging in this mental model. So they're moving away from it. But they can't make this change all at once, so they're doing it slowly. When the distinction goes away, Hangouts will be just like SMS. If you think about it, Apple already beat them to this with iMessage, and Google is playing catch-up. But instead of launching a new product, Google is just extending their existing IM ecosystem to take over the SMS space.
I suppose I wouldn't care if I didn't have gchat on 100% of the time I'm on a desktop but I dread the day Hangouts replaces Talk.
I definitely prefer the look of Hangouts. I don't see much difference between it and GTalk utility-wise.
You see online/idle/offline/mobile/mobile-idle icons and status messages in hangouts?
Also, I understand that they are trying to make things minimal and look cool but it's not something that's very intuitive or noticeable. I thought it might have meant that I have a chat window open with that person.
The real shame is that Google already had a fantastic offering and they killed something beautiful: an integrated product that included a real time communication client (gchat), a messaging service (gmail), and a group/community based social network (g+).
That's what Google Voice will give them. You call them from the Hangouts app and they pass it through Google Voice if they're not signed into any Hangout machines. It roughly works this way already for existing GV users.