What Google has announced is at best a move towards a more semantic search algorithm and at worst another tweak to an approach to search that is becoming increasingly ad-hoc and fragmented.
The latest idea probably won't make a huge difference, but at least it represents a coherent and new approach to search. Unfortunately, the Knowledge Graph that Google has started using isn't described in sufficient detail to get an inside view of how it works. What Google says is that it organizes data into objects. So, for example, when you search for Taj Mahal then there will be a number of objects in the graph that are labeled "Taj Mahal", including the famous building, eating places and a musician. The graph is used to provide an extra category of choice to the user via a side-bar. You can use this to pick out a more exact category of object that the search phrase refers to.
So not so radical but search needs to move in this direction. The whole approach to search has to become increasingly semantic. The sorts of methods that we currently use are simply stop-gaps that try to make up for the fact that the search engines don't understand the client or the articles at the end of the links they harvest. Without understanding there can be no reliable ranking of the importance of content and no interpretation of the search phrase.
It may be difficult to think of a world where Google is not the top search provider but only a short time ago there was only Yahoo and then Google introduced Page Rank to destabilize the market. A sufficiently intelligent search engine could do the same again.
One speculation is that it is in the Web search engine that strong AI will first appear as a commodity algorithm.