They had clear boxes of $100 bills in the lobbies, replete with guards. That's a lot of petty cash, about $5M worth.
And yes, Google calculated the appropriate taxes, so everyone's actual bonus was more like $1343 or something. This is all in addition to the regular bonuses that Google employees get (usually between $20k - $30k a year, and up to $800k for founders awards).
I find this a bit too cheesy game-show-like but a bit cool. I'm not a big proponent of the idea that we are in Bubble 2.0, but Google handing out cash is pretty hard to ignore.