I believe technorati offers watchlists for terms you want to look out for.

After reading the post above from the person with no name, if you do a search for something at google's blog seach, they have the RSS feed HTML tags behind the scenes (which Firefox picks up and can use.)
Do a search, and in the release candidates for Firefox 1.5, its an icon you click on in the URL bar. For previous versions, I remember it being at the lower right hand corner of the browser window.

I could see that as being a very hard to organize thing (the e-mail notification.) Here you are, getting your one or two hits a day with your search for 'H5N1', then BAM! a new type of Viagra comes out labeled, H5N1.
Now, not only is your search going to have to be refined (dang, where did I put that password to change my settings), but your inbox is going to be swamped for the next few days.
Actually, I could see how someone could write a Firefox extension that might be able to do a similar thing, depending what you're asking and the nature of the blogosphere (or whatever they call it.) Lots of variables though. Depends on what you're after, how easy it is to accomplish, and how much money you can convince people they can make with it.

"Google has had it for a while" and "it is a fairly recent phenomenon" are not necessarily contradictory: the service has been out for a little over two months (see my post when I first noticed it and Google's announcement of it on the Google Blog).

http://blogsearch.google.com/ google has had it for awhile

Why Google isn't all over this, I don't know.
They are, though it is a fairly recent phenomenon. There's both a Google.com-hosted version and a Blogger.com-hosted version. They're basically the same service, though I think the Blogger.com version has a few extra refinements (though it's been a while since I compared them). N.b., the Blogger version indexes all blogs with RSS/Atom feeds, not just those made by Blogger.
They don't have email alerts as far as I can tell, but they do have RSS and Atom feeds for the search results that you can subscribe to.