This strategy does actually make good sense.
Why invest time, money & effort into the web standards that allow you to drive your business model forward, when the implementations are so (comparatively) poor.
By implementing their own very "compliant" product, they a create an instant market for the solutions they want to "sell", as well as creating competitive pressure on other browsers to improve, and thus increase their potential market in the long run as well.
You could argue, why don't they just contribute code to Firefox, but they have no control over what is actually released, or it's long term product direction. Too much pressure and Mozilla becomes a "Google mouth piece".
If they fork Firefox and run on their own, then they get accused of all sorts of nefarious activities against a well regarded OSS project.
Neither outcome does Google's reputation any good.
There is also the bonus, that even if Chrome only gets a 5% market share that's still 5% fewer users they have to pay to have redirected to Google services.
Personally, even as a Firefox fanboy, I very much welcome any standards compliant competition. Thanks in a large part to MS, the web's potential has stagnated for far too long.