This discourages you from ever making breaking changes to an API. On the face of it that sounds good but sometimes you do have to make breaking changes. My guess is that there are many duplicate projects in the Google code base for when a breaking change is needed. This is a way to sidestep the problem.
I think sometimes it's actually the opposite. I was able to make a breaking change to an API and update all of the callers to use the new one in a single commit.
Tests would run on all the clients and, since in my workspace the server was updated simultaneously, I could be more sure it would work.
That's fine for small breaking changes like an API being renamed, but some times breaking changes require actually refactoring code which is hard/impossible to do without intimate knowledge of a codebase.
Think python 2->3 or Angular 1->2. These types of changes do happen, and I bet they happen at Google. I don't think anyone is rewriting a downstream app when they make these changes. Most likely they are doing something like forking the library and renaming it, which is just another form of versioning.
python 2->3 and angular 1->2 indeed need a different strategy and the strategy varies per case. For Angular both versions will have to be supported (basically just with different directory name) and switch most probably won't happen in terms of single applications, but by writing completely new applications on new stack. Lifespan of web application is rather short, so we can afford this.
As someone who's responsible for migrating the users of a large breaking change (~300 projects), it does discourage you from making a breaking change. I'm not convinced that this is a bad thing though. Breaking changes can be both expensive and tempting. By making the author of such a change feel the cost of it you prevent the migration work from becoming an externality.
It also encourages writing tools for automating this stuff. A big part of the motivation for polyup (https://github.com/PolymerLabs/polyup) was the fact that we'd be responsible for getting people to upgrade.
