It started with Google announcing two “major strategic business relationships” on October 9th. One of the relationships was struck with Warner Music Group, while the other was with Sony BMG. Both agreements allow Google to stream music videos from both labels in an advertising-supported environment, and enable other Web publishers to incorporate the videos into their own Web sites. Agreements with both labels also mention that users eventually will be able to legally combine label material with their own videos, thus ensuring the future of the music video lip-syncing industry in the years to come.

On any other day, the agreements with Sony BMG and WMG would have been big news. However, those were simply warm-up acts for the headliner that was announced later.

Later that very same day, Google announced it had purchased YouTube.

Suddenly everything came together, and the label deals Google had trumpeted only hours earlier seemed much more important than when they appeared to apply solely to Google Video.

Of course, Google’s purchase of YouTube wasn’t totally unexpected. Rumors of the impending acquisition began circulating at the end of the previous week. However, the price – $1.65 billion – had some people reeling from sticker shock.

But that doesn’t mean Google wrote YouTube’s owners a 10-figure check. Instead, it was a stock-for-stock transaction. Even so, that’s still a lot of paper for a Web site that has yet to turn a profit. So much, in fact, that the transaction is being described as Google’s most expensive acquisition.

But there’s no denying that YouTube is one of the hottest sites on the Web. So much so, that it has almost become synonymous with user-supplied video Web sites. While other companies like Microsoft and Yahoo have their own YouTube clones, it’s YouTube that people automatically go to when searching for video.

YouTube, which is expected to retain its brand name, will stay in its San Bruno, Calif., location. All of the company’s 67 employees, including co-founders Chad Hurley and Steve Chen, will continue to run the show.

Of course, YouTube’s copyright problems will now become Google’s copyright problems. However, the aforementioned deals with Warner Music Group and Sony BMG are expected to entice other media giants to close similar deals with YouTube. Add that to the list of media companies interested in using YouTube as a promotional vehicle and it becomes clear that YouTube is fast becoming an important player in the entertainment industry.

For instance, in the hours leading up to the acquisition announcement, YouTube was also announcing deals with media companies. Like Google, YouTube had completed similar agreements with WMG and Sony BMG. In addition, the company had also closed deals with Universal Music Group and CBS.

The Universal / YouTube agreement is pretty much like the deals with the other labels. The CBS deal calls for the network, along with its premium television service provider Showtime Networks Inc., and its basic cable/digital media service, CSTV Networks, to provide YouTube with short-form videos on a daily basis, including sports, news and entertainment programming.

But will YouTube ever make any money? The eyeballs may be there, but turning those views into cash is hardly an easy task. On the other hand, turning clicks into cents is one thing Google has excelled at during the last few years.

Google’s video plans call for using its network of online advertisers. The company is also planning to distribute videos through its AdSense partner sites. You’ll still see Web sites embedded with video links leading you back to YouTube or Google Video, but you can bet there will be an advertisement somewhere in between.

And there will be a lot of people seeing those ads. According to comScore Networks, worldwide traffic to YouTube grew nearly 2,500 percent from August 2005 to August 2006, from 2.8 million visitors to 72 million. With numbers like that, it’s no wonder several companies, including Yahoo, Microsoft and News Corp, courted YouTube before the company tied the knot with Google.

The Google / YouTube deal is expected to close before the end of the year. Meanwhile, investors showed confidence in the combo by boosting Google stock on Nasdaq 2 percent to close at $429 a share on the day of the announcement.