I definitely think Google are doing this to secure more of the display market, the main problem they have at the moment is that the AdWords platform isn't as good for big companies who want more intelligent targeting, but they have DoubleClick to work towards that I guess.
It really is the platform for small companies who use search agencies though, as you say. I also like that it helps search get closer to biddable media. Converging search, online and traditional marketing methods can help everything work better together and this is an easy way for smaller companies to get into that.+dan barker
Yeah, I agree with you on the win:win situation, it should help campaigns improve and keep AdWords happy at the same time. I think by wasting less of users money they will be inclined to spend more rather than just turning it off if it doesn't look like it's working.