This new extra layer of security--adding "something you have" to "something you know"--to your sign in credentials helps to better protect you and your information in Google (i.e. in the Google cloud), including your emails, documents, and applications.
While a little extra work to login to Google--you have to type in a verification code that Google sends or calls to your phone (this is the something you have), it provides an extra layer of defense against hackers, criminals, and identity thieves.
To protect your Smartphone, Google provides "Application-specific passwords" that you generate from the 2-Step Verification screen and then you enter those into the specific iPhone, Droid, or Blackberry device.
You can sign up for 2-Step Verification from your Google Account Settings page and help protect yourself, your information, and your privacy.
In the future, I hope that Google (and other cloud vendors) will improve on this and use biometrics, to add "something you are," to the authentication process and make this even sleeker and more secure yet.
Stay safe out there! ;-)