I've tried severl indexing systems but all of them were quite annoying during indexing. I found that Goole Desktop really waits for idle CPU to index your drive. Performance isn't incredible, though it is fast enough to be useful. Also the size of the index isn't that small, though it is indeed acceptable. You cannot index all the documents: just text and Office (even PDF are ignored). You have almost no control over the indexer policy.
In conclusion it isn't the best application I've found, but it's ok. And this is the reason because it rocks! You don't have to bother with options and tuning. New items are indexed as soon as possible, and you can always search, even during indexing. You can search only office documents and e-mail, it may seem too restrictive, but for most users it is the content they care for. And, last but not least, it is from google, and people like google.
And Microsoft? Microsoft is still working on search, after 4 years since Bill Gates declared search as a crucial technology. I still have a search facility on WinXP that sucks, and WinFS has been stripped out from Longhorn. I can only conclude that, if Google releases a Web Services API for the desktop application, WinFS has no real reason to exists. Applications will begin to ask for Google Desktop that is already available and on all Windows platforms. It seems to me nearly ridicolous that a software giant like MS isn't capable of producing a decent software for search. It was 95 when I dismissed FindFast and since then they didn't really improved their technology.
I don't think that MS is out of the game, though now they have to compete on the market and do somenthing about it. And now Google is ahead, they will improve the tool and extend support to other document types, multiple users on the same machine, and so on.
In the end I think that Google got it right: they took the KISS approach, and with that they produced a useful tool that many users will be more than willing to use, in particular now, that our disks are filling with more and more data.