What is Google Instant? Search results while you’re typing. Not the little drop-down thingie that anticipates what you’ll type, but actual results (complete with local map, for appropriate searches) that change as you type. See the screen shot below for an example. Notice that while the user has typed in “bed and” Google suggest has added “breakfast” and the search results are for the full term “bed and breakfast”. If you change the third word to bath, the results change.
Is this a good thing or a bad thing? The answer to that question depends on a number of factors. Google’s Matt Cutts says you should give it a chance, as it will speed up your research, getting you results really quickly. He also addresses concerns that this will destroy, or at least change Search Engine Optimization (SEO).
No doubt it will change SEO, as search, like the internet itself, is not static. Things change, and businesses adapt. SEO adapts regularly to new algorithms, new players (Bing), etc. This is just another new factor. It will change things. How it will change them remains to be seen.
For a fun example of using Google Instant, and a really effective ad, see Google’s video, below.