It's a new feature that lets you serve your blog from a custom domain without having to host it yourself. Your old Blogspot address will forward reader to your new custom domain so you don't lose any precious readers, links, or bookmarks.
This is much simpler and cleaner than using the FTP hosting option to serve your blog from your own domain, a very neat solution indeed -- particularly for small businesses who want a hassle free blog, but need it to be served on there company's domain.
I'm planning to take advantage of this new feature to host this blog, I'll update the post with progress.
UPDATE: Done! As of today the blog can be seen at blog.radioactiveyak.com -- all the advantages of Blogspot hosting without the stigma. Sweet. The transition was seamless, and the blog (and all post permalinks) redirect from the old Blogspot subdomain, so I'd have to classify it as a success. Slick move Google.
UPDATE 2: PageRank for the blog on the new domain is zero and straight after the transfer Adsense was displaying PSA. 12hrs later Adsense had figured itself out, but PR will likely remain zero until the next PR update. The question is -- will links to the old domain count towards the new one?