Just found this today in my Adwords account. Does it work? Yes. But you have to check everything out first.
Of course, they optimize your keywords up to number one position. So unless your ready to start paying out the teeth, you have to take these suggestions with a grain of salt. It's great for long tail keywords. But many times a lower position with better ad copy will win out. Let all the new "kill 'em all" hot shot advertiser's pay out the teeth.
The Ad Optimizer works. It adds www. to any display url without it and capitalizes any seperate words it finds in the display url. But sometimes it picks out the wrong words. For example, One Ill Honda when the name is O'Neill Honda. And it gets confused when your domain name starts with a "w" it will suggest ww.Word.com.
But all in all, it suggests exact bids for each keyword to take you to the top. I have seem the results in a few campaigns.