An interesting post and comments at Search Engine Roundtable regarding Google’s recent statement on re-writing URLs.
Google has somewhat changed its mind about re-writing URLs, as they now claim to be better able to understand dynamic URLs (the sort of query strings you often see in e-commerce website addresses, for instance, along with many content management systems). The reason is that they now see query strings such as “search.php?keyword=toys” as more meaningful to the page’s intention and content than “search.php/keyword/toys”, which is how many URLs are re-written. The structure of the former is now properly identified by Google as a search term, whereas previously it may have had little meaning. Converseley, the latter now looks like a page three layers deep in the site, but doesn’t necessarily represent a search query, so Google is less likely to identify the true purpose of that page.
My take on this is that if you are re-writing URLs from something meaningless such as “page.php?id=76” to something meaningful like “page.php/seo-urls-still-good”, that still helps both the search engines and users to understand the contents of the page and I would continue to use it. If you are re-writing search queries like the “toys” example above, maybe you could try a few without the re-writes – but remember that you could lose the PageRank of the originals, so be sure to 301 re-direct the old URLs to the new ones (and update your sitemap accordingly!)