I really don't see how Google would become a "knowledge engine" when they don't have ANY "knowledge"?!? They have exactly zero in-house content, everything they use is the work of somebody else.
There is only so far they can go with other people/companies content. I am certainly a drop in the ocean, but if Google decides to start using my own content in a matter that robs me of visitors, I would do everything in my power to stop Google from ever seeing a word of my website. Internet entities right now are putting up with Google's theft only because there is a hope that they will be compensated in visitors, but once Google starts to shut that pipeline down...
If this is their goal, however, I can only applaud and encourage them. It will only speed up their demise, which is long overdue, and we will finally get some fragmentation and competition.
Unfortunately, I believe that what they mean by "knowledge engine" is the business strategy to slowly remove any "trade websites" from the organic results and fill the first page with "information" or "knowledge" websites - wikipedia, yelp, ehow, etc. By doing this they provide organic results to non-converting visitors, while those searching to buy/use a product or service will have to click on the ads.
I already gave a clear example of how this strategy is beginning to shape up here: [webmasterworld.com...]
In that example you can see how the "trade websites", which any normal person would expect to see in the first page for that search, are not there, instead yelp and citysearch dominate the organic results, while 10 perfectly targeted ads supplement the "knowledge websites" that were returned in the organic results.
For those not convinced, another example is that when I search for "buy insurance in MyState" - the top 3 results are .gov pages and a total of 5 results in the first page are local government pages, even though they don't sell insurance.
Penguin, Panda, EMDs, trusted sources - these are all recent attempts by Google to weed out the "trade websites" and give the "knowledge websites" a dominant position in the organic results.
And Google will make a lot of money before people being to realize that what they are doing when "googling" is simply searching ads.