With desktop search Google now has an application that makes it much more likely that you will continue to use their search engine.
They have created a switching cost – after spending several hours indexing your drive, you are less likely to switch to a different service.
Although there is a lot of hoo hah about desktop search, its still amazing that it took till 2004 for searching your own machine to become a mainstream app, when you have been able to search thousands of other computers around the world, within an instant, since the last millennium.
Expect Microsoft to counter aggressively, their business is built around owning the command line or desktop and they will likely build in indexing out of the box, meaning that Google desktop users will end up with two or more indexes.
Whatever Microsoft do, Google have shown the way forward, their desktop search makes your desktop just one more search tab. It brings your desktop to the web rather than the web to the desktop and this seems like a much more logical UI experience.