"That means that when customers search for ‘jewelry,’ for example, they’ll now be presented with a list of top categories like rings, bracelets, necklaces, anklets, and earrings," she wrote (see above screenshot). "The change in search will roll out across desktop and mobile today and could help aid product discovery within the marketplace."
The key to a successful e-commerce site is a balance of search efficiency and an ability to browse based on your interest.
This change seems handy to me. You can start with a simple search and then kind of narrow your topic. The search is very visual, much like Pinterest, which I think will increase engagement and make the site easier to browse. The metaphor is much more like tagging and allows things to be found in different classifications rather than just a single tree. The interface allows the user to narrow their focus with single clicks in a very visual manner.
In a more general sense, e-commerce sites will be more successful if they can maintain a user's attention. People like to quickly find what they want, but also like to browse and compare options of similar products. There is a reason that people browse and wander in a physical store -- giving people the ability to do this virtually is smart. Again, Etsy's new search is very reminiscent of Pinterest.
Creating a successful e-commerce site means allowing consumers to easily find your products through search, in the way they are thinking of the product. You have a higher chance of selling to the customer if you can narrow the search to a smaller group of highly relevant products and allow that consumer to browse and refine as they like. If you can retain the user's attention without annoying the user in the process, you will have a much higher likelihood of converting the sale.