What does this mean for the future of search? I would say that you should definitely focus on "AZ" as a keyword over "Arizona," but continue optimizing for "Arizona" as well. For example, if you are a realtor who is hoping to sell homes in Queen Creek, Arizona, use the term "Queen Creek, AZ." The difference is subtle, but it may get you a few more hits. In all reality, though, Google knows that "AZ" and "Arizona" are pretty much equal, so I wouldn't expect a huge difference. If, however, you are setting up a Google AdWords campaign, make sure you use broad search, or if you use exact search, use both "az" and "arizona."
Information from Google Trends