Google is apparently compensated by vendors that appear in its Flight Search and Hotel Finder vertical search engines. Last year, Google launched Hotel Finder and Flight Search, that seems to be directly in competition with Kayak or Hotels.com. Both appear prominently on Google's main search results page now.
But its because Google is collecting money from vendors its search engines point users to. The results seem to be the same as pure "organic" results, except companies are paying Google for the referral. Here's the disclaimer/explainer that Google shows users right now:
Which looks even worse when you line that up with Google's statements in its IPO filing in 2004:
We do not accept money for search result ranking or inclusion. We do accept fees for advertising, but it does not influence how we generate our search results. The advertising is clearly marked and separated. This is similar to a newspaper, where the articles are independent of the advertising. ...
We apply these principles to each of our products and services. We believe it is important for users to have access to the best available information and research, not just the information that someone pays for them to see
Of course, that's changed for now. Which doesn't necessarily mean a bad thing though.