When you install the Google Custom Search Engine on your pages, on many browsers, you will notice that inside the search box is read in a light font, "Google Custom Search." Here is a screen shot of our implementation on this site.
A Google Groups thread asks how can you remove the default text from the search box.
2.3 Attribution. The Search Box shall conspicuously display a graphic (available at http://www.google.com/coop/images/searchbox.gif ) that indicates that the Service is provided by Google. The graphic shall link to the Google site located at http://www.google.com or such other address as Google may designate from time to time during the Term.
But if you want to take a chance and remove the attribution then according to the Google Groups you can add the value=" ", so the code looks like:
<input name="q" type="text" size="40" value=" " />
There are mentions that the AJAX implementation by default does not show the "Google Custom Search" text. If that is the case, then go with that method and you won't be violating Google's terms of service.
Forum discussion at Google Groups.