Can someone explain how the keying system works? What is the secret information a user needs to decrypt messages addressed to them? What prevents a 3rd party from decrypting those messages? What is the 'key'?
Of course, that is still vulnerable to an active MITM attack where somebody intercepts the initial key exchange and inserts their own keys. The app has a built in option to display your fingerprints so you can compare them if you meet the other person.
Even with this vulnerability, imagine if everyone started using it overnight... All of a sudden there wouldn't be millions (billions?) of new private messages stored in a bunch of databases every day. The telcos aren't going to perform an active MITM attack to decrypt peoples SMS.
An optimist!
Given how easy it would be to do, I think they'd at least think about it. However, it's also trivial to detect, so we have that going for us.
If you're thinking "But MitM!!!" then don't. The main weakness of this is actually the plausibility of losing your phone, and hence encryption keys. Unless perhaps they are stored on Google/WhisperSystems' servers. If not it would open you up to this weakness: "Hey, ignore the security warning for this text - I got a new phone so the keys changed. Remind me again what our secret terrorist plan is?"