Google said they have been testing this with 50 online merchants and more than 10 million orders. So far, they said it has been "working even better than we hoped."
Merchants in this program can unlock the merchant badge if that merchant can "deliver a great overall experience." Those who get the badge will have it displayed in their AdWords ads like this:
Merchants in the US can apply here.
Merchants, webmasters and SEOs are both happy and upset with this. Some would never use it, while others can't wait to try it.
Forum discussion at WebmasterWorld.