From the Inside AdSense blog:

We're also launching the new 200 x 200 size ad format, better known as the small square. This ad format supports text, image and video ads, and we hope that you'll find it a useful option when integrating your ads into your site.

I'm using it on one of my sites as a personal trial of the format. You see an ad block with two (sometimes 1) ads.

On the right page it looks ok. The pages I'm showing it on are generally concise ones, and the big ad blocks are too out of proportion. As regards performance, it's on a site that has historically been a fairly poor performer and it's improved the income slightly on the pages it's on.

As ever, try it and see how it works for you.

I get good results on 200*200 blocks, but it all depends on how your pages look and how much room you have... I have a 200*200 block in a right sidebar, which fits like a charm... Obviously a good thing ^^