Google has today announced that the Google Drive app within Hangouts has been discontinued, and is being replaced by the ability to share links to Drive files directly within the Hangouts chat window.
To choose a document link to share, you can either go to the document and copy/paste its URL, or use the new Drive button located at the bottom of the chat window next to the Emoji button. The document link, after it has been pasted in the Hangouts chat window, will show a small preview and clicking it will open the document in a new tab for collaborating with others.
To make it easier to collaborate during Hangouts video calls, we’ve enabled the sharing of links to any Drive file directly from the chat window. Shared links will show a preview of the file right in the chat message, even when other participants don’t have their chat window open. Clicking on the link will open the file in a different browser tab so you can conveniently work on it in full view.
This update should be rolling out to everyone over the next few hours, and it appears that the Drive app has already been removed from the directory of apps. If you have the app installed in your Hangouts, you should be able to keep using it until December 15th, 2014.