KML Search means that Google, in addition to searching many other file types (DOC, PDF and PPT, for example), can now search inside KML/KMZ files. (KMZ is a compressed form of KML. For most purposes, they are interchangeable.) KML files are basically text files with a certain structure, nothing more. Let's start with a KML search from the Google Search interface.
If you click on the first one, the KML is downloaded and if you have Google Earth, it's displayed there.
Now, there's nothing geographic about that search, except that it's looking for KML, a type of geographic data. We could have added the word Nevada, but it would be just a text search for KML files, using both terms.
To search KMLs spatially right now, you need to use Google Earth. Support for such searches in Google Maps is under development. Let's try the same search in Google Earth. This time, I chose to do the search in Seaside, Oregon. (I happen to know they fly kites there.)
The finder of this KML finds not just a location but this description of it: "Haystack Rock: The area surrounding the rock is popular for picnicking, kite-flying, and bird-watching. Artists and photographers can be found capturing the beauty of Haystack..."
That's what's possible today, with the limited number of KML/KMZ files on the Web. But, think ahead. What if more KML appeared on the Web, not necessarily as the end goal of a search, but as metadata for something else to be found: a business' website (that's already happening), an image (that's already happening) or geospatial data? And, what if the API of Google Maps were available to build spatially enabled tools to search out these Web-hosted goodies tagged with KML? It's those and related possibilities that the geospatial community needs to explore.