Testing products internally is a pretty normal practice for many companies, and while beta testing with individual consumers is also a good idea, it's almost a better idea to make sure everything humanly possible is ironed out before those products or services are handed off to outsiders. This is typically how Google tests many of their products and services, like Google Glass, Google Plus, and features that have been introduced to Google Plus like "Collections." They refer to it as "Dogfooding," and it gives Googlers a chance to see how things work, and what doesn't work and perhaps fix things with a little more fine tuning before public testing.
This process also serves as a means to grab internal feedback from other like minded individuals at the company, which can sometimes help to steer things in the right direction and spark new ideas if things aren't exactly as they should be. It's a practice Google has been doing for years, and one they aren't likely to quit doing any time soon. Internal testing does seem to have its drawbacks though, and at least a few Googlers admit that various Google product decisions are somewhat questionable, a factor caused by the types of people which are employed by the company. Google is a relatively forward thinking entity, and they produce some really innovative and cool things. Some of the stuff they're researching could even be considered groundbreaking. Not everything ends up this way though, and sometimes it has a little to do with the "nerdy makeup."
A past Google Executive mentions that product launches require a crucial element of getting a bunch of Google employees on board, and that to do so those employees would have to want to use the product. This makes sense, but it can also sometimes lead to a resulting product or service in which doesn't necessarily mesh well with the average user or consumer, generally because for the most part the average users or consumers don't think like Googlers. This ends up sometimes resulting in products shipping with features that engineers are drawn to, but these are also features which individuals may not find simple to use. One particular service which is referenced was the Circles feature within Google Plus, which a former employee stated some users found "unnecessarily confusing." To get around this with other products, he tasked his employees with testing them after they'd had a few beers, a method he thought might help his designers be more in tune with how users might feel when working with some products made by Google. One need only look at things like Gmail, Android, and YouTube though to recognize Google's successes in these areas too, all things which have had internal testing and all are immensely popular, a sort of testament to Google's Dogfooding practices showing extreme promise.