This was a marketing feature more than anything else so google could boast about how fast their search engine was. However, it always had tons of usability problems for no added benefit to the user, especially when refining a previous search, or trying to retype some funky word you found in the results.
I guess that for the intersection of slow typists who look at the screen while typing, Instant Search is useful. But how big is this intersection really?
If I try to hint and say, "look, there's an autocompletion thing that has already guessed correctly what you are painfully trying to write, why don't you click the top suggestion?" she just shushes me away (she's busy concentrating on typing). So I have stopped doing that, and am now just resigned to sit and wait, whenever these things happen.
One of the amusing things was that users would follow the instant results without necessarily being consciously aware of them. I.e., when describing their interactions with prototypes, only a few noticed and pointed out that they were getting results without pressing Enter, yet a larger number clicked on them. It had to be pointed out to them, at which point they would often go "whoa". I remember a few non technical users who really raved about it.
Maybe it would just end up feeling random and unreliable though.
The irony is it took about 4 weeks to get up to a useable speed. I kept using it for almost two years afterwards because it was so nice to have a trackball in my right hand and complete control of the keyboard with my left hand, and not have to ever move either hand.
The main point is that during this time I was a slow typist, and looking at the screen while doing it. It was rather agonizing. Deep sympathies for disabled individuals was developed during that time.