deadsea - 10:32 am on Aug 6, 2012 (gmt 0)
Back before Panda and Penguin, I implemented this kind of thing for some authority sites. A couple of the sites that I implemented it for were hit by Panda because of it. They took it down and recovered from Panda eventually.
One authority site that I worked on still has it up. It is the most interesting case because they try hard to only target relevant keywords and have put a lot of effort into building the pages to look less like search results and more like product pages. Its great for them because it creates landing pages for alternate ways people search for their products.
If you are going to implement this, here is my advice:
1. Google doesn't like it, and this can cause your site to lose its authority and rankings.
2. Don't use the word "search" anywhere on the page (other than the search box where you use it on all your pages). Its a red flag to Google if especially if the word "search" or "results" appears in the title.
3. Be very careful about what you can create pages for. Only create pages for relevant terms. Have your tech implement some confidence threshold and if it is below that, return a 404 instead of showing a off-topic page. Matt Cutts has publicly demonstrated that a site "deserves" a penalty because he was able to type a celebrity name into a search box (way off topic for that site) and get a crawlable page.
4. For a search term that is an exact match for the name of a product, 301 redirect to that product rather than create a duplicate page.
5. Make the page look less like search results. Often people are interested in just the very first result. Pull in additional information about that result. Make the page look like a product page in these cases. Pay attention to user engagement metrics for this the same way that you would on the main product page.
If you are going to report sites that are doing this, try to create a really off topic page. A current event might work well as you might be able to link to it and get it indexed quickly where it gets enough visibility to bring it to Google's attention. Link to that page from somewhere to get it indexed if you have to.