Just click on "show options" to enable the tool belt with advanced filters. The new options can be used to search the public photos uploaded by Picasa Web Albums users, the photos uploaded by your favorite users or your own albums.
Picasa Web Albums indexes tags, captions, album titles, album descriptions, and album locations, but many photos don't have proper metadata and they're not searchable.
If you've been using Flickr's advanced search page to find Creative Commons-licensed images, Picasa Web is another place where you can find images that can be reused or modified. For example, 81,302 from the 3,064,934 search results for [Oslo] are licensed using Creative Commons.