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It seems like ICANN is doing everything possible to blackmail the big companies into spending a crapload of money to cover their trademarks. First the .google/.ebay, and now this.

English is supposed to be the universal language for the internet, what this will do is make things a lot harder for everyone. We'll see brand dilution, since instead of simply registering google.ru, google will need to also own гугл.com/.ru/.net./org/.biz etc etc

I saw this domain a while back and I bookmarked it: http://www.εργασία.gr So greek letters seem to be allowed.

If you search for it, you can see few more domains with greek letters: http://www.google.com/search?client=safari&rls=en-us&...

Despite the fact that I am a native speaker of a language which uses the Cyrillic alphabet, I am not at all happy about the coming phishing attacks.

How can you distinguish between Latin o and Cyrillic o?

This is actually a browser issue, and was anticipated long before. A valid workaround would be to allow for input in Unicode, but display the url output in Punycode.

I'm pretty sure most popular browsers already account for this vulnerability. At the very least, Mozilla-forked browsers should still have a built-in defense against homograph attacks. [https://bugzilla.mozilla.org/show_bug.cgi?id=279099#c135]

I am with you. In my mother language, there are also a few characters which have special small signs above them, but I still think using them in URL will be a disaster. Websites which have such characters in their names will be forced to register both names (with and without special chars)...or...maybe that's the point?!
I have a feeling some domain squatters will rush to register the native-language domain name equivalents of the top 500 sites for each country with a non-roman script and then resell it to the expected owners for big profit.
That seems certain to me. I don't know how to get around it though. The long-term benefit of moving beyond plain ASCII for URLs is key to continued growth and success of the internet.

In China for instance, numeric URLs are becoming prominent where English ones are too unfamiliar for many uses. That's a pretty poor state of affairs.

how will users with North American keyboards access websites with characters not on their keyboards?
This depends on the OS but you can usually just switch the keyboard language, use alt codes or load from a character map app. Chances are if you don't know how to write the script, you won't know how to read the language being used either.
Unfortunately the default settings for the OSes I've tried are extremely limited with respect to multilingual input. I can read and write some Spanish and Japanese for instance, but haven't had the need to for a while now. So my current laptop doesn't have an IME set up. I'm not even sure how I'd go about doing so. (Though Japanese IMEs are pretty slick. Think code completion, but for kanji.)
I had the same trouble, couldn't figure out how to get my mac to deal with hiragana/katakana/kanji input a while ago when learning japanese. Anybody know how to do this?
This actually relatively simple on a Mac. All you have to do is go to International settings in Preferences and select check Japanese as an input language. Then you can select between the character sets and languages from the menu bar (or your desired hotkey).

One of the major reasons I switched to a Mac was because font rendering was a lot clearer for East Asian languages.

Thanks for that, not sure how I managed to miss something so obvious back then!
Click on links, like they always have? :)

Almost no one types an URL. They type search terms and follow links. And needless to say, if you can't type the URL in its native language, you're unlikely to be able to read the page anyway.

And if you really need to be able to see a normalized ASCII representation, it's still there. Non-ASCII DNS names are actually stored in "punycode", a semi-readable 7 bit printable encoding:

http://en.wikipedia.org/wiki/Punycode

I always thought it was funny that http://☭.com was taken, and furthermore that whatever software the squatters use was smart enough to put ads for Russia-related things on the page.
I have mixed feelings about this. One one hand, this will promote wider unicode adoption which imho is a good thing but this will fragment the internet as regions split by language.