I've been tracking the growth of social networks and social apps from the time online groups were the most social thing going. Facebook's explosion is of course notable; 25% of the web's traffic is generated from links shared on Facebook.
The following image reflects the impact of social vs utility sites:
[caption id="attachment_235" align="alignnone" width="500" caption="Facebook, Twitter, Digg"][/caption]
Both Twitter and Facebook are social. Digg is a utility, and much less social, meaning sharing news links is not really an activity between friends on Digg, it's among Digg users.
Twitter's traffic is impressive, but it feels too techie to become a serious challenger to Facebook. The UI isn't great, and it's not a place where I think about inviting friends to join. In fact, I can't recall if Twitter even has an invite function.
So social matters, even though we discount its importance to us personally. We don't take Facebook seriously, but we use it, and a lot of people use that as their only entry into the web. No wonder Google's running scared: it's an aggregation of utilities, and hasn't developed a compelling social story. Why search if your network has fed you enough to sate you?