More than 15 million iPads have been sold since Apple launched the gadget in 2010.
The latest version of Google's Android OS is called Honeycomb and it has been specifically optimised for tablets.
The features include the ability to buy applications from a computer, buy features inside the app, video chat and improved graphics.
"This is a serious investment of years of design and engineering to really nail the experience for a larger screen," Hugo Barra, Google's director of products for mobile, told BBC News.
"This is not a large phone - we wanted tablets running Honeycomb to not just be bigger but also to be better."
Motorola will be the first to bring a product running Honeycomb to market. Its Xoom device is due to go on sale this month, although a release date and price have not yet been revealed.
"Honeycomb brings Google closer to parity with Apple and underlines the battle between these two titans," said Ben Parr, co-editor of technology news site Mashable.
"Google has its strengths especially in the cloud, with their open source platform and integration with other Google products like Gmail and Google docs," he said. "But Apple has the design edge and a vast number of apps as well as a new iPad expected in the next couple of months."
'Big win'Google's announcement of a web-based version of the Android market is one that is seen as long overdue.
This now means that users can browse and buy apps directly from the web. Previously users had to purchase through the Android market directly from the device making it difficult to find, download and buy apps.
Thanks to the cloud, users can send apps directly to any Android device with just a few clicks of their mouse.
"There's no wires, no synching with computers - none of that nonsense. Everything is connected," said Chris Yerga, Android engineering director.
Technology blog TechCrunch called the webstore a "big win" for developers.
"It lowers the hurdle you have to go through to buy an app," said Jason Kincaid of TechCrunch.
"If you are bored online, I can imagine a lot of people heading to the webstore and clicking on five apps before they have really thought about it."
Making money
Google also unveiled in-app purchasing, a new feature to let developers make money by selling virtual goods and upgrades in their apps to consumers.
Convincing developers to back Android is seen as key to drawing in more customers.
So far Android has more than 100,000 apps in its store, while more than 300,000 have been created for Apple's iOS.
At the launch of Honeycomb at Google's California headquarters a number of developers showcased apps designed specifically using the new operating system.
CNN presented a new tablet optimised app while Disney said it would be joining the webstore with three apps including a version of the music rhythm game Tap Tap Revenge.
Disney's head of mobile Bart Decrem said there had been more than 50 million downloads of Tap Tap Revenge on the iPhone alone.
"We have been waiting for in-app purchases and for Android to get to this stage. This really represents a general maturing of the platform and it's a really important one," said Mr Decrem.
'Best foot forward'
Unlike Apple, Google does not make its own devices but gives its operating system to manufacturers for nothing. That approach has served it well in the smartphone market.
To date there are around 145 devices running on Android, including a handful of tablets.
Google said it would be up to hardware sellers when users would see Honeycomb appear in more tablets.
Motorola will be first out of the gate but LG and T-Mobile are expected to follow close behind with their upcoming G-Slate tablet.
"We've put our best foot forward and now it's up to the ecosystem, the manufacturers, to make it flourish," said Google's Mr Barra.
He said some of the features in Honeycomb would find their way on to Android smartphones when that is updated.
But will Honeycomb help Google slay Apple, which has a new iPad out in the coming months?
That depends, says Ina Fried, senior editor of AllThingsD and the Mobilized blog.
"It's a combination of what's the speed, what's the price of the device, what type of apps will be available and when.
"This is about other people's products competing with the iPad. Clearly Google is putting a lot of resources into Android and with this first entry it's going to be a fun thing to watch," Ms Fried told BBC News.
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