Google started Open Handset Alliance around 2007 that would combine device manufacturers and software companies.
The Android Stack:
Native Libraries – specific to the device like running video, browser, 2d, 3d graphics, sql lite storage.
Runtime +Dalvik VM –> This is where applications run. A more better/faster similar to java byte code that is compiled using the SDK.
Android Framework: Google provides the framework to tap into software components and bridge them.
System Apps: Contacts, Phone Dialer, Email, Games, your applications.