Google supports cross domain canonical link element

The webmaster help pages advise further of how this should be correctly utilised

Can rel=”canonical” be used to suggest a canonical url on a completely different domain?
There are situations where it’s not easily possible to set up redirects. This could be the case when you need to migrate to a new domain name using a web server that cannot create server-side redirects. In this case, you can use the rel=”canonical” link element to specify the exact URL of the domain preferred for indexing. While the rel=”canonical” link element is seen as a hint and not an absolute directive, we do try to follow it where possible.

Yahoo and Bing have both formally to announce support, however it should be noted that Google do still advise this should be a last resort, and other avenues should potentially be considered before utilising rel="canonical".

Where possible, the most important step is often to use appropriate 301 redirects. These redirects send visitors and search engine crawlers to your preferred domain and make it very clear which URL should be indexed. This is generally the preferred method as it gives clear guidance to everyone who accesses the content. Keep in mind that in order for search engine crawlers to discover these redirects, none of the URLs in the redirect chain can be disallowed via a robots.txt file. Don't forget to handle your www / non-www preference with appropriate redirects and in Webmaster Tools.
Source: Official Google Blog

However there are certain situations where this may not be possible, for example on hosts where 301's may not be able to be configured. The following points taken from the Official Google announcement should also be considered

• The rel=”canonical” link element should most certainly not be used for 1:1 mapping of sites. URL specific usage is recommended as 1:1 usage may ’cause problems’
• The rel=”canonical” link element is seen as a hint and not an absolute directive, we do try to follow it where possible.

The news has been generally greeted positively by the industry, however it will still be interesting to see the takeup of this in general.