Official Google Mobile Blog: Google Mobile App for iPhone now with Voice Search and My LocationNow, it works -- at least in a quiet room.
... The new Google Mobile App for iPhone makes it possible for you to do a Google web search using only your voice. Just hold the phone to your ear, wait for the beep, and say what you're looking for. That's it. Just talk. Once the App is on, you don't have to push any buttons to search....
I have the Google app configured so kb entry is the default. That gives me more control over the voice app initiation. I hold the phone about 8 inches in front of me -- not against my face.
With this approach, in a quiet room, the results are quite good. Good enough that the speech driven search UI is now an improvement over typing in the query.