We noticed this about a week or two ago. It was available in one of our manager's acct, but not in other accts (so Google was testing this on a few accts.) She used it to make a TV ad. It's very easy to use. Drag and drop images, add soundtrack (select from several tracks) or use a microphone to add your own voice.
We've been running TV campaigns for several months. The cost-per-ad-play is insanely low; I wonder if Google's billing engine is broken or if this is the price of class-3 ad space (i.e., last-moment, nobody else buying that spot). I've talked with people who manage traditional ad agencies; this could put them out of business.
We're doing the following: the ad points to a unique URL (Widget-TV-Offer.com), where the widget is shown. Click on a big button ("Get Your Widget Today") and that click gets tracked by analytics. It goes to the order page at widgets.com, where the tracking happens.
You manage the ads by CPM, not cost-per-ad-play.
To answer eWhisper, it looks like you can use the tool to make video ads (for web play) as well. But in our experience, it's better to use a video camera and to make 3-minute interviews with people (the TV ad tool does 30-second ads with still photographs.)
For AWA: The Google TV team initially recommended very high budgets and CPMs ($2-5,000 per month). We found we could run campaigns at much lower budgets ($200 per month). Yes, you'll certainly get more exposure with more spend, but low spends also work. We're about to launch several nationwide campaigns. Our 2009 Strategy docs for nearly all of our clients include a section on TV advertising.
You can target the cable channel (MTV, Animal Planet, and hundreds more), the TV show (Martha Stewart or whatever), or the movie (many movies are in constant replay). You can also target by income, age, and sex. GAW's TV placement tool is very easy to use; in fact, it's easier than Adwords keywords and text ads.
There are two geographical targeting options: entire USA or local, which at this moment is only Walnut Creek (a small city near San Francisco) with 70,000 homes. When we met with the Google TV team and they told us about this, along with the high budgets, we didn't think much of it. But ten minutes later, Maggie and I realized that one of our clients had a target audience in Walnut Creek, so we tried it out. Google's TV team has been testing the local cable in Walnut Creek for the last six months and if it works out, they'll roll this out for the rest of the USA: you'll be able to use local targeting.
The future of this? Google TV advertising may become bigger than search advertising. 98% of the USA watches TV. TV ad revenues are $75 billion (search marketing is only $25b or so). It's possible one day people will think Google is a TV ad company that "maybe also does something with the web" :-) My advice: start using it.