This post on Techdirt reports:
"You can search the hard drives of other computers on your network with Google's new desktop search. I followed the instructions on the site and I was able to search through my roommate's computer. Quite a scary bug in one of Google's fastest growing programs."
The post goes on to question whether this is an un-documented feature or a bug. Certainly the functionality would be pretty cool from a network Administrator standpoint or even from a home network standpoint, but if it's a bug, there are some pretty serious privacy concerns. You would think that if this was a feature that Google would be touting the ability (and probably would put in a opt-out feature that the user could control).
Anyway, if you use Google Desktop Search, be warned.