There are two simple reasons for this: usage of Google Reader has declined, and as a company we’re pouring all of our energy into fewer products. We think that kind of focus will make for a better user experience.
That’s a crock of shit. The real problem is that you can’t monetize Google Reader when no one actually goes to the web interface.
I personally use Fever and highly recommend it if you have your own web server.
If you don’t, NewsBlur is probably your best option.
If you are a developer who makes a living off of selling an app that re-packages Google Reader, this is a huge blow, but you had to see it coming. Reeder for iPhone syncs with Fever, and I have to believe that is not a coincidence.