Rumors had been circulating for a while that Google is developing its own Android-based phone.The Wall Street Journal reports that the rumors are confirmed and that Google employees are currently using a prototype of the Google device, which will be dubbed the Nexus One.This would be built by HTC and it would be unlocked and sold online directly and through retailers.It won’t be sold by any one carrier, but instead will be an unlocked GSM phone.

In the U.S., that means T-Mobile and possibly AT&T, whose exclusivity deal with the iPhone is about to run out soon. It will be running Android 2.1.The phone will only have Google branding (Microsoft did the same thing with their first Zunes, which were built by Toshiba).The entire user experience is designed by Google.It all started when tweets about the Google phone seemed to emerge confirming about it.

Another guy named Jason Howell, says he had his hands on the device, which he says is made by HTC and is running Android 2.1: “The new Google Phone runs on HTC hardware. I saw it w/ Android 2.1. Homescreen has new visual enhancements like animated desktop wallpaper.”

“Supposedly, Google employees were given tons of these phones today. unlocked,” he adds.After this was one a tweet from GreatWhiteSnark “A friend from Google showed me the new Android 2.1 phone from HTC coming out in Jan. A sexy beast. Like an iPhone on beautifying steroids.”

After the tweets from Google employees, Google also confirmed that it is indeed “dogfood” testing a new Android device with employees around the world.”There won’t be any negotiation or compromise over the phone’s design of features. No splintering of the Android OS that makes some applications unusable. Like the iPhone for Apple, this phone will be Google’s pure vision of what a phone should be.

Coming back to the specs it features a Snapdragon chip, has a super high-resolution OLED capacitive touchscreen, its thinner than the iPhone, doesn’t have a keyboard, scroll ball, and animated desktop wallpaper and has two mics. The mic on the back of the phone helps eliminate background noise, and it also has a “weirdly” large camera for a phone. And if you don’t like the touchscreen keyboard, a voice-to-text feature is supposed to let you dictate emails and notes by speaking directly into the phone.

Start Slide Show with PicLens Lite