The SMS Chat feature, we reported yesterday was indeed available but was pulled later due to some bugs. Google product manager Leo Dirac has posted the info on Gmail blog, stating that the add-on will be back to the Gmail Labs list in 2 weeks time.

Here is a description of what it does

you chat from your computer and reach your friends no matter where they are. Your friends who are away from their computers get your messages as texts and can peck out replies on their little keyboards. It was pretty cool for a few minutes last night when we were sitting around texting each other.