Sebastian Thrun, who drew 160,000 students to his free, online artificial intelligence course, is quitting Stanford University to create a free online university called Udacity.

There were more students in his course from Lithuania alone than there are students at Stanford altogether, said Thrun in a talk at the DLD Conference in Munich, reports Felix Salmon of Reuters. Of 248 students who earned a perfect score, all were online students.

Thrun was eloquent on the subject of how he realized that he had been running “weeder” classes, designed to be tough and make students fail and make himself, the professor, look good. Going forwards, he said, he wanted to learn from Khan Academy and build courses designed to make as many students as possible succeed — by revisiting classes and tests as many times as necessary until they really master the material.

And I loved as well his story of the physical class at Stanford, which dwindled from 200 students to 30 students because the online course was more intimate and better at teaching than the real-world course on which it was based.

“I can’t teach at Stanford again,” Thrun said. He hopes to enroll 500,000 students for his first Udacity course on how to build a search engine.

It’s too bad Thrun has to leave Stanford to create Udacity, Salmon writes.

Stanford refused to issue a certificate to the 20,000 online students who finished Thrun’s course and a second open computer course, notes NPR. Instead, online students received a letter from the professor indicating their class rank.

“We are still having conversations about that,” says James Plummer, dean of Stanford’s School of Engineering. “I think it will actually be a long time — maybe never — when actual Stanford degrees would be given for fully online work by anyone who wishes to register for the courses.”

By contrast, MIT will offer a credential, for a small fee, to online students who succeed in courses offered by MITx.  ”A world-famous university with an unimpeachable reputation” is putting “its brand and credibility behind open-education resources,” writes Kevin Carey.

It’s the great unbundling of the university, writes Alan Jacobs in The Atlantic. Universities used to offer a bundled package of knowledge and credentialing.

People attended university in order to learn stuff that they couldn’t learn elsewhere — because the experts weren’t elsewhere — and to be certified by those experts as having actually learned said stuff. The bundle has been a culturally powerful one.

But now: unbundling. Clearly, many universities have come, or are coming, to the conclusion that their primary product is the credentialing, and that they can give knowledge away either as a public service or as brand consolidation (choose your interpretation according to your level of cynicism).

Can universities continue to control credentialing?

I wrote about digital badges, an attempt to challenge universities’ credentialing monopoly, on the U.S. News site.