"..Roman keyboards are the norm in India, making it difficult to type in Indian languages. We decided to tackle this problem by making it very easy to type phonetically using Roman characters and we launched this service as Google Transliteration..."
You can try it hands on here http://www.google.com/transliterate#
In this new version, you can select from one of seventeen supported languages: Arabic,Bengali, Greek, Gujarati, Hindi, Kannada, Malayalam, Marathi, Nepali, Persian, Punjabi,Russian, Sanskrit, Serbian, Tamil, Telugu and Urdu. You can also compose richly formatted text and look up word definitions with our dictionary integration. If the default transliteration is not the word you wanted, you can highlight it to see a list of alternatives. For even finer-grained control, we provide a unicode character picker to allow character-by-character composition.
Apart from this they have also introduced Google Transliteration IME application that can be installed on your desktop(Windows 7/vista/XP) and used to enter text into desktop applications.
http://www.google.com/ime/transliteration/
Google Transliteration IME is currently available for 14 different languages -Arabic, Bengali, Farsi (Persian), Greek, Gujarati, Hindi, Kannada, Malayalam, Marathi, Nepali, Punjabi, Tamil, Telugu and Urdu.
More details about features and config here http://www.google.com/ime/transliteration/help.html
Google post announcing it http://googleblog.blogspot.com/2009/12/transliteration-goes-global.html