Google has announced a new "Custom Search Engine". Customized search engines are not new. What is new is the built in AdSense advertising option that splits revenues with the web site or blog owner. This is the thing that most technology people miss. It is not about the cool features and technical aspects...it is about the advertising revenue opportunity.
I have been using Rollyo search on my blog for a long time. Eurekster and others also offer embedded search engines. They all work reasonably well, but they don't offer an ad network or revenue splits.
With Google Custom Search users can choose which pages or sites they want to include in their index, how the content should be ranked or prioritized, and how the search results page will look.
Michael Arrington at TechCrunch has a good review along with screen shots of the new search engine set up page and customized results pages.