I like how this new feature reduces the feedback loop in search. I particularly like how the feedback you are reacting to is search engine results pages, not just the suggested search terms from type ahead. Some bloggers are saying this makes SEO irrelevant. I disagree. For content creators, this means it is even more important to have your good content at the top of the right key terms and phrases search results. I am more likely to try different phrases and searches, since results are "instant". I am less likely to click on a result that does not have a strong "scent of information". A new result is only a letter away, why try something that does not appear correct? Having good content, content that looks correct to the user, has become even more important. Ensuring that this content is found by the user has become harder. The SEO challenge has changed, and increased in difficulty, but it is *not* irrelevant. This makes content even more important to your search results, not less.
What it does seem to effect significantly is SEM. My cost per impression just changed. Google will be rendering my ad more often, but users will be clicking on the ad less often - this should mean that I get more impressions for my cost, assuming I am paying per click. I think it makes the top line of SEM better - I, as an advertiser, get more value for my money. Assuming exposure offers some value. If my only value comes from clicks, the top line stays the same.
What I like about Google Instant is the fact that this leverages Google's traditional strength, SPEED. It does it in a way that Microsoft will have trouble responding to - due to the infrastructure costs that speed requires in terms of local servers to reduce response time. Google has already made that investment. I do not think Microsoft has to the same extent. This innovation leverages Google's massive dataset of user behavior as well. It puts the work on the computer, and not the user - which is always the right place to put it.
I'm not sure how much this will impact the enterprise search arena, however. Most enterprises are unwilling to support the infrastructure needed for millisecond response time in the search results page, both in terms of network and in terms of hardware. I wonder if the GSA is going to support this feature, and if so what they will specify for the network and hardware requirements.