Google Labs has launched a new search tool, "Search by Location". The search requires two fields, one for key words and the other for location. The search results include a map with results plotted on it. See this example searching for "pizza" near a NY address.
This kind of search will be truly successful when it becomes coupled with mobile phone and other location-aware devices. At that point, you won't have to enter the address (because the device knows where it is) and you easily search for places nearby. Not to mention the potential for geographically-specific AdWords advertising.
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Good find, Slud! Folks will want to read the FAQ too: http://labs.google.com/help/FAQ_location.html
Some things that you'll want to remember: right now it's U.S. only (gotta start somewhere, right?). The other thing that's not obvious at first is that it's not just matching to categories--it's actually searching web pages with addresses for the words you type. So it's fine to do searches for things like dancing lessons, but you can also query for really specific words, like darkroom rental rc fiber nearby 94043, or things that don't really fit into typical yellow pages categories, like wildlife sanctuary nearby portland, oregon. Things will get faster and better with time, but tell us what you think of the general idea of a web geosearch like this.