Here's a very detailed discussion between Marissa Mayer and Gord Hotchkiss about Google's approach to personalization. Google is slowly but surely pushing personalized search results, mainly because they believe they can increase relevance.
Interesting factoid: currently, Google will only personalize 2 out of the top 10 results, and never the first result.
The actual implementation of personalized search is that as many as two pages of content, that are personalized to you, could be lifted onto the first page and I believe they never displace the first result, because that's a level of relevance that we feel comfortable with. So right now, at least eight of the results on your first page will be generic, vanilla Google results
Later in the interview, Mayer lays out details about how PageRank works for personalization:
Interestingly enough, the reason they were interested in building a faster version of PageRank was because what they wanted to do was be able to build a PageRank for each user. So, based on seed data on which pages were important to you, and what pages you seemed to visit often, re-computing PageRank values based on that. PageRank as an algorithm is very sensitive to the seed pages. And so, they had figured out a way to sort by host and as a result of sorting by host, be able to compute PageRank in a much more computationally efficient way to make it feasible to compute a PageRank per user, or as a vector of values that are different from the base PageRank.
Good stuff for the SEO-ologists. And for the SEM crowd, a tidbit at the end:
And as to ads, I think there are some easy ways to personalize ads that we've known for some time, but we've chosen at this point to focus on personalizing the search results because we wanted to make sure to delivered the end-user value on that, because that's our focus, before we look at personalizing ads
Won't that be fun!