Google has also tested this and Microsoft tried its own version of integrating graphical advertising into search.
If not abused this is a win for all involved because it combines the directional effectiveness of search with branding (images, video). At a time when CPM/display advertising is falling in price this is also a way create a vehicle that can command higher display rates (but that’s not why they did it)
I suspect it’s only a matter of time before Google formalizes its own program along these same lines.
Local angle: Right now this is only for large advertisers but you can imagine how this might be extended to local advertisers (especially on Google) at some point in the future, drawing upon video they’ve created via one of the many third party sources.
Update: Here’s more from the Y! Search Marketing Blog.