It's similar to how advertising works on Google itself. An advertiser buys a position for certain keywords; "big game fishing," for example. Whenever someone types those search terms into YouTube, an advertiser's sponsored video will pop up above all other videos.
This is the logical next step for YouTube. After in-video graphical and text ads, post-roll advertising, as well as regular banners, they pretty much did all they could to the video itself without ruining the user experience. However, they still have the positioning of the videos to experiment with, and that's what they're aiming for here; most users won't mind having a sponsored video on top of a search listing. After all, they're used to it: it happens on Google all the time. On the other hand, advertisers will likely jump all over this; after all, it works so well with AdWords.