Okay we now know the secret mobile project Google was working on was the Android open source operating system; not the much rumored "Google Phone". But if you needed any additional proof think about this:

Out of 717,000,000 different websites, Google thinks the apple iPhone homepage is the most relevant to the word "phone". If Google is or was ever interested in developing an iPhone killer they would have never awarded them a search engine position that amounts to millions of dollars of free advertising.