You're absolutely allowed to release 20% time projects publicly. As in any large bureaucracy, there's a process for that which is taught during onboarding. What you're not allowed to do is skip the process. There's nothing Google specific about it and I've seen similar firings at other companies too. Skipping legal and corp comms review on any external public communication is grounds for termination.
I've never worked for an employer, from pizza delivery, to corporate intern, to multiple startup, to FAANG, that didn't have this VERY CLEARLY worded in the employment agreement, right up top:
1. Any work you do during company time/resources/equipment, is company property.
2. Anything public related to work, or that could be considered as competing or providing the service in the same space as work, needs to be vetted by the company.
Along with public communication, etc.
In my experience, this isn't some "what happens when MBA's run company" or "they run out of ideas", it's literally every company I've ever worked for.
Was google previously an exception here, or are people just unfamiliar with the details of the 20% policy? Surely they didn't allow you to work on, for example, something for a competitor? There had to be some limitations, rather than a pure free for all, as seems to be suggested in the comments.
The policy was always crystal clear, but at the same time, tons of people found it confusing. "I wrote this at home on my personal computer in my free time? Why does google own it? how can that be legal" came up a lot. People would get into huge fights with OSPO over this.
He released the product with Google branding making it look extremely like an official Google project, and then it went viral and blindsided everyone who would have been involved in creating or approving this kind of tool internally.
If I released a tool personally that I hadn't told anyone at work about and put my company's logos all over it and it went insanely viral then I would expect an extremely uncomfortable conversation with my manager, his manager, HR, and at least one lawyer.