We find Google adwords an invaluable way of backing up our TV ad campaigns and we are a fairly small start up. I've spoken to a number of Google reps and they were all really bothered about making sure that as a small business we were able to get up and running quickly because they "know we don't have a big ad department" - so from my experience, Google absolutely wants small businesses using them.

Thinking about it, with Google's push to make you add your business location to maps etc they are really starting to compete with the Yellow Pages which was/is basically 100% small to medium businesses - I guess it's a market where the combined long tail is much bigger than the big players.