Actually Google focused on the things it can control and quickly update. Google Play Services is automatically installed by Google Play Store and it adds new APIs that Android apps can use, regardless of the Android version (Play Services requires Android 2.2+). That's a great way to deal with Android fragmentation and it allows Google to announce APIs that can be used by any app and that can reach almost any Android device.
"Devices running Android 2.2 and newer and that have the Google Play Store app automatically receive updates to Google Play services. Enhance your app with the most recent version of Google Play services without worrying about your users' Android version," suggests Google.
For example, Google Play Games services can be used by any Android game to provide features like saving state, leaderboards, achievements, auto-matched players, real-time multiplayer. These services can also be used on iOS and for web apps, so they're even more useful. If Google added these features in Android 4.3, few people could use them and few developers would update their games to support them. Most likely, only Nexus devices would be updated to Android 4.3 shortly after the announcement, while other devices would be updated in 6 months or later or maybe never. Android 4.2 was launched 6 months ago and only 2% of the Android devices run it.
New Android versions are still important, but Google has some other meaningful ways to make Android better. Most Google apps are available in the Play Store and can be updated without waiting for a new Android version. Chrome, Google Search (with Voice Search and Google Now), Google Maps, Google Hangouts, Google Calendar, Google Play Music and the other Play apps can be improved and change the way you use your Android device. Play Services can improve entire categories of apps, add features that improve battery life, make notifications more useful, improve Google+ and Google Maps integration.
Android's flexibility is a double-edged sword. In this case, detaching system apps and APIs from the operating system is a huge advantage and makes new Android versions less important.