The Nexus products are meant to be the flagship of Android smartphones and tablets, implemented at the state of the art, powerful enough to display all the latest features and efficient enough to have a decent battery life.
Android One aims to be the smartphone of the masses, much like Nokia GSM phones were at the time. For this reason the phone has to be cheap and low-end, but at the same time Google is promising to deliver the latest Android features on it.
I am quite happy with this direction for many reasons. First, because Google will spend effort to improve Android software efficiency. Software optimization will benefit not only the Android One project, but also all the other smartphones that will run the same operating system. Then, when so many people will have a smartphone that would be categorized as low-end, Android apps developers will be compelled to write software that will run smoothly with limited resources. Lastly, it will drive the innovation for companies that produce integrated circuits, batteries, screens and mechanical parts.