In Designing Web Navigation, I have a whole chapter on integrating search and browse. The point is that from a user’s perspective navigating and searching aren’t different things. People just want to find information. And we know from berrypicking theory that people can switch their seeking strategies rapidly while looking for information online.
Google introduced Sitelinks in their search results back in 2006. These are automatically generated based on an analysis of the target site’s structure. Often, the links naturally reflect the main navigation options of the site. With this, the scenario is: you do a search on Google, and from the results can directly navigate the target site. (BTW, the introduction of Sitelinks is another good reason to make sure your site is well structured and has a meaningful navigation system.)
Recently, Google also introduced a site search features embedded right in the results list:
So now the scenario is: do a keyword search on Google, browse the results list which includes navigation from target sites, and now you can even do a keyword search on specific site. The line between search and browse is really blurred here. And that’s a good thing, I believe.
EXPERIENCING INFORMATION 
I totally agree with you James, though interestingly this is bringing up a few leagal arguements – particularly from the New York Times who argue that its taking page impressions away from their site by allowing direct access to their content through Google. As the NYT is now completely a display advertising site, with no paid-for subscription, I can see why they may have a problem. However, allowing a better search and then browse combination can only be a good thing right?
Interesting take on Google’s new feature. Without having thought it through, I’m gonna wager a guess that the NY Times is still better off with this feature because the likelihood that people can find content on their site is probably higher. And if I’m finding the exact article I need on the NY Times, it’s more probable that actually I’d click on an ad. So page views might go down, but click-throughs might go up. Just a counter theory…