I'm not quite sure how much I like this. I can see my search results getting populated with a bunch of apps that I don't want, like "Game of War". This will be interesting to see how this plays out.
I'm personally hoping they target more generic keywords like genres of game or coupon or hotels or stuff like that. I'd be very annoyed if they let advertisers target specific app names like "Facebook", "Twitter", or my own app's very specific name (as long as it isn't generic)
Why wouldn't they? As somebody pointed out elsewhere, ads on various scummy sites show up if you search for "Firefox" and other things on regular Google search. I'd guess people who are searching for something specific are more likely to actually make a purchase or whatever, so they'd be more valuable to Google.