Google has confirmed that its Google toolbar is generating a custom Google error page when a requested page is not found, generating a "404" error. The toolbar returns the Google-created page when a site's 404 page is less than 512 bytes long. This approach means that web sites that have created custom pages to handle 404 "page not found" errors will have those pages displayed, while sites without a custom 404 page will have Google toolbar users redirected to a Google search page.
The bottom line: if your web site doesn't have a custom 404 page to capture errant URLs and user typos, it's a great day to create one. You'd be surprised how many business sites don't have these.
The new Google toolbar functionality, which has been noted at TechCrunch and SEOker, has drawn early comparisons to VeriSign's Sitefinder initiative from 2003, which triggered a heated controversy before being rolled back. It's not a completely accurate comparison, but one that Google should have expected.