You wont read about it in an official Google post in any of the Google blogs I am aware of, but it’s a fact from like 2 months now – Google does transliteration from Latin letters to Bulgarian letters when searching*. The service is old enough for checks to be made and conclusions to be drawn.
It is not uncommon to see Bulgarian words written with Latin letters when examining referral logs or when using keyword tools. This type of searching seems to be most common among teenagers, but it is not limited to just them. The actual percentage of such queries is probably unknown even to Google, since there are so many words that can be transliterated. Some words become valid English words when transliterated and others have more than one (non-standard) transliteration versions in use which further complicates the task of spotting such words.
Not before long, when a searcher entered a query, containing transliterated words, he or she would get too little results and would definitely miss a lot of great websites. This resulted in a poor search overall experience.
However, Google has taken steps in alleviating the situation and now returns much more relevant results where it failed before. It is using the official standard for Bulgarian-to-Latin transliteration as approved by the Bulgarian Government so it catches most cases. In cases Google is not sure about whether or not this is a transliterated word it gives the “Did you mean…” message, suggesting the right transliteration, like here. Nice job, Google!
Website owners, webmasters and SEOs need not worry any more about people who are trying to reach their websites with searches with Latin transliteration versions of the keywords.
* This is a problem not specific to Bulgaria, though. As far as I know the problem with Non-English speaking users entering sometimes queries with a transliteration of the keywords in Latin letters is present in China, Greece, Japan, Russia and other Slavic language countries. I have no information about whether or not this problem is solved in these countries but I hope my fellow Multilingual-Search editors will help