A nice article from Caroline Jarrett explaining why it's not a good idea to put hint text in form fields you expect your user to complete.
Caroline co-wrote a great book on web form usability and having seen her speak on a number of occasions I know her to be a bit of an expert on all things forms. I also used her 'Forms that work' book as the basis for specifying how our CMS form feature should work.
Purely anecdotal, I know, but the default text appearing in our university website search feature - "search term" - is the number one phrase searched for.
Don’t Put Hints Inside Text Boxes in Web Forms - article by Caroline Jarrett for ux matters
Related to this - and a nice illustration of Caroline's point - is a parallel test illustrating the impact of including hint text.
Search Box A/B Test: Which Increased Revenue Per Visitor? - Which test won
Related post: My blog post on Caroline's book (August 2009)