A significant new service has launched into beta since I posted my Hosted Web System Comparison a few months ago. The service is called Drupal Gardens. Drupal Gardens is a product of Acquia which specializes in commercial support of the open source Drupal content management platform.
As the name implies Drupal Gardens is a hosted version of Drupal, or Drupal in the cloud. This gives you access to the functionality of Drupal without having to create a hosting account, upload files and manage databases. In that sense it's a service that is very similar to WordPress.com. If you're not familiar with Drupal I suggest that you see my Beginners Guide To Drupal which provides an overview of the capabilities of the platform.
Drupal Gardens is built on top of Drupal 7 which is currently in alpha and available for download. Drupal Gardens is not just a recreation of Drupal 7. It includes a new point and click theming tool (pictured below) that allows non-designer types (count me as part of that group) the ability to switch and customize many elements of their theme very easily. This functionality is similar to what is offered by Squarespace. There's also a WYSIWYG editor (using CKEditor) which is something not included in Drupal 7 core.

Drupal Gardens Theme Interface
Because Drupal Gardens allows you to build sites that range from basic blogs to full communities it is more of an alternative to services like Squarespace and Ning than Wordpress.com or Typepad. I have added Drupal Gardens to my Hosted Web System Comparison so you can see how it measures up to all of these services. Since it's early in the beta period you can expect that features will expand as Acquia processes feedback from the community.
Drupal Gardens is employing a freemium business model which allows you to create a site for free that has traffic limits and advertisements. For either $19.95 or $39.95 per month, per site you can remove the ads and expand traffic limits. This may seem pricey to those who are used to paying $9.95 per month for shared hosting that allows for multiple sites. You have to consider that when you pay for a service like this you're paying for the simplicity, convenience and performance that you won't be getting in a shared hosting environment.
There's a unique element to the Drupal Gardens service that I haven't yet found with other hosted web systems. If you get to the point where you want to move to your own hosting you can export your entire site and migrate it to Drupal on the host of your choice. I know with WordPress.com you can export the posts and the comments but I don't think you can take the files with you as well. So that's definitely something to consider.
At the present time rich media support within Drupal Gardens is limited. You can upload and automatically resize images for inclusion within posts. There's also a media library that allows you to access your previously uploaded images. In my limited testing so far I have not found a way to easily create image galleries. Uploading and handling of audio and video are still a question mark? I haven't seen any indications of how these will be handled and what limits for file sizes and total storage allocated will be in effect. So if you're site is going to be a media heavy effort you'll probably want to keep an eye on the Drupal Gardens blog to see what they announce.
There's no doubt that Drupal Gardens is going to be a contender in the hosted web system space. The service is still in the early phases of development so it may not be ready for your new production website yet. The good news for those who want to give it a try is that the platform is free at all levels til the end of 2010 so you can assess the readiness and your level of comfort without any risk. Right now you'll have to do with a yoursite.drupalgardens.com web address but they should have custom domains up and running in the near future.
Current Drupal site builders should consider having a look at Drupal Gardens as a way to preview some of the features available in Drupal 7. Drupal Gardens may also end up being a good option for serving clients who need community sites built and deployed quickly. For those who are new to Drupal this is probably the best way to get acclimated to the interface and features of the Drupal platform without having to install databases and get into all that technical stuff.