Organize the world’s geo-reference information and make it useful and accessible. Google has indexed various GeoRSS and GeoTagged data available on the web allowing users to search for more then just addresses from the maps interface. This includes all Google MyMaps created by users.
So the GeoIndex API is both AJAX and RESTful. It is the same as the local search API with a geo context.
AJAX local search allows you to do everything from maps.google.com. The API allows users to indicate what type of results you want returned. There are a few types of results you can ask for.
Any content that Google indexes which contains a Geo Context, I guess either via lat,lon or placenames is now available via this API.
Also another thing they have released is a new type of SiteMaps. Something called a GeoSitemap. If you have geo content on yourwebsite then you need to put a geo sitemap in your website and then it gets indexed. How to create such a sitemap is documented on the Google Code KML documentation page.
Search ranking algorithm is a question that Google is not providing detail on yet. They are saying that this is not a solved problem, implying results may not always be accurate and relevant.
Search queries used in examples seem to always have ‘near’ and ‘in’. Sounds like these are keywords and are used as intelligence parameters in the backend.
GeoServer has started an attempt at combining the various GData APIs with the GeoIndex API. (http://geoserver.org/display/GEOS/Exposing+to+Geo+Search)