At the recent "Search Factory Tour" event (slides, YouTube video), Google announced that its image search engine has received a lot of attention from users lately and it intends to dramatically improve it. People no longer use Google Image Search only to find celebrity pictures or pretty images, they started to use it to compare products, to choose vacations or visualize unfamiliar situations.
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After adding face detection as a restriction for image search, Google prepares to expand it and actually recognize faces. This will improve the quality of results for searches that include person names. Google doesn't intend to limit image recognition to people faces: finding objects in pictures is a difficult task, but it's a reliable way to filter irrelevant pictures.
Image search engines don't use the information from EXIF tags, that could offer a lot of interesting contextual details about location, date, image quality. Google will start to add information about geolocation from digital images.
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If we take into account that, in addition to all these enhancements, Google developed an improved algorithm for ranking images (VisualRank), we can expect an entirely new image search engine from Google in the near future.