If you think about it, it'd be slightly inaccurate to say that phones let people all over the world communicate with each other; current tech just transmits sounds, not their significance. But Google's looking to knock down language barriers with devices that will perform translations on the fly.
This isn't some poorly sourced rumor or random conspiracy theory. Chris Gourlay interviewed Franz Och, Google's head of translation services, and Och said, "We think speech-to-speech translation should be possible and work reasonably well in a few years' time."
Incredible as that might seem, the building blocks are already in place. Android allows users to perform searches by just saying terms out loud. Google Translate deals in 52 languages at the moment. Google only needs to integrate everything in order to be in business. Maybe.
The sentence "I am going to eat lunch at 12:30" becomes "I'm going to lunch at 12:30" after Google Translate takes it from English to Spanish and back. That's enough of a difference to create confusion (suppose someone's trying to distinguish between stuffing his face and stepping out to run errands), and it's not like Spanish is a rare dialect or the original phrase represents a curveball.
Toss in imperfect speech recognition, and it's hard to imagine anyone trying to conduct important business or even chat for fun.
Nonetheless, it should be very interesting to see how this project works out for Google.