The name Google Babel started circulating throughout the community a few months ago, and we all nodded in agreement that the Babel name fit the future new chat service. It abruptly got switched to Google Hangouts, which we all did not like at first. Well turns out, the Google Babel name was correct. We just got the service wrong.
Google Babel is actually a new Google translating service that Hugo Barra mentioned in a UK Times interview. This service will give users the ability to say anything into their device, then the service will translate it back to you in whatever language you choose. Sounds pretty awesome, and it will be a huge step up from the Google translating service we currently have. No word on when the service will be implemented. Barra said it is still in the early stages, and the biggest issue they are facing is the affect of background noise. Just maybe, they will work the bugs out and we might see this enhanced service in Android 5.0 Key Lime Pie.
Source: Talk Android