Some days back, I checked out the Google Indic Transliteration service. I was amazed at the way the guys have implemented it!! It is dissimilar from most other transliteration services in many ways. Here, you get the word in your selected language, say tamil the moment you type a word in english and hit the space bar or a punctuation symbol. If the spelling appears incorrect, clicking on the word gives you more suggestions and the word can also be edited as needed.
I found that it worked like a charm for most words, which I verified with some of my friends as I am weak in Tamil. Hindi seemed to work fine too and a friend of mine said Kannada was also transliterating to their respective correct spellings! Way to go guys!! The languages currently supported by this application are Hindi, Tamil, Telugu, Kannada and Malayalam. It works better if you type a word in English which a English speaking person would pronounce correctly, for example, in tamil, the word “portions”(English) would not transliterate correctly, but typing “poshuns” seemed to do the job >:-)