CNET News.com: Google tests local search:

“Like many Google experiments, the new function may or may not be widely incorporated into the company’s well-loved search engine, but Google has hinted at its ambitions for geographically targeted search in the past. Local search and advertising is also pegged in the financial community as a massive opportunity for major portals and search providers.”

You can also try the live Google Search By Location. So you can now find Indian Restaurants in New York, NY.