We have a theory: "Android Extensions" is a plan to bring the easily updatable app model to the AOSP APIs. Like Google Play Services, we think this app will be a bundle of API shims that Google can update whenever it wants. The difference is that everything in Play Services is a closed-source Google API, while "Android Extensions" would be collections of fresh AOSP code delivered directly to your device via the Play Store. The CDD's stipulation that OEMs "MUST preload the AOSP implementation" is telling. It says that 1) this is AOSP code, and 2) OEMs aren't allowed to "customize" it.
If Ars' assumptions are correct, this looks like a decent step forward - assuming it pans out, of course. Clever, too.