I'm in Palo Alto and actually had seen their small office on Hamilton. I do know how it works and tried to myself but found it really cumbersome. The only explanation I can see is iPhone users who didn't have the benefit of Google maps a few years back that propelled Waze's use. As for the valuation - if they had even 10M active users, Google paid $100 for each of them, knowing that it was inevitable that they'll eventually get the iPhone users anyways.