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You can now create a CSE by simply placing a small piece of tailored code on a page on your site. With that one piece of code, Google's search technology will automatically include in your new CSE all of the sites you have linked to from that page, creating a dynamic, powerful and tailored search experience really quickly. Moreover, your new CSE will update itself periodically to include any new links added to that page.
Google CSE "Custom Search on the fly" [googlecustomsearch.blogspot.com]
This looks rather neat.
It used to be that one site, receiving all your attention, was enough if it was top three in its niche.
This update is interesting in terms of niche search and cross reference. I'd like to see how the change affects those already using their CSE service - as it is CSE does a good job of indexing pages, I wonder how this improvement will change that?
Does this have an API with it, or are you stuck with google's UI?
No API - but fairly customisable.