I just intalled the new version 2 (Beta) of Google Desktop. It now has a QuickSearch feature that works like Apple’s Spotlight, i.e. search as you type.
It also has a new cool Sidebar thingy, with panels such as Google Mail, Google News, RSS feeds, photo feeds (I can display pictures from my favorite Flickr feeds), “What’s Hot” links, stock info, weather… It’s much slicker than anything similar Yahoo! has ever done, like their Toolbar or the Messenger panels.
Google Desktop has an API and an SDK so you can write your own panels for the new Sidebar. I think this new version is even kind of competing with Yahoo! Widgets (a.k.a. Konfabulator), except Google’s APIs look more complicated (all the samples are in C++, vs. Konfabulator SDK’s mix of XML and JavaScript). Of course, Konfabulator widgets look really cool, but I think Google’s sidebar is more practical.
Update: official announcement on the Google Blog.