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This is iMessage style messaging for Android... if both users on secured network then use secure network else fallback to SMS/MMS..

Why Google hasn't be able to integrate hang outs in this fashion is still a mystery.

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Google rolled out integrated SMS in Hangouts (on Android) a month ago. It's not as transparent, but SMS and Hangout chats are in the same app, and you can switch between the two types of communication with the same person easily.

Please no. iMessage is terrible when one side is offline. You send iMessage, but the receiver isn't connected, so it will not receive the message until it's online. iMessage and SMSs should keep separate.

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