Google Play Games has supported online multiplayer for a while, but now it's even easier to play against your friends who happen to be within gloating distance. Play Games now includes support for multiplayer with people who are physically near you.
This won't just work like magic in all your games, though. Developers have to add the Play Games APIs to enable multiplayer. There are already a fair number of games that use Play Games in some capacity, so hopefully you'll actually have the opportunity to try this.
This feature has been slowly making its way to users recently, but now that it's official everyone should be seeing it. Notifications should appear if there's someone playing the same title as you are nearby, but you can also search for nearby players in the matchmaking screen. Neat stuff.