The web service would monitor advertised prices on things all over the place.
When an item/price/location combination in one of my thresholds for a subscribed item or class was triggered, I would be notified. Cherries are on sale for X here, Y there, and the current not-on-sale average price for N radius area working from M number of stores listing this is Z. Each of the locations would be flagged on a map, and my location would be shown on the map as well.
I could generate a shopping list from the service, in classic Web 2.0 format where I get to pick what goes on the list, how the list is organized, and how much detail is printed for each item.
I could text-message shopping list items to my account, and organize them when I got back to a computer. I could ask to get my current shopping list text-messaged back to me if I forgot to print it. I could ask that I get a text message for alerts on any given subscription category. There would be support for multiple individuals in a single household account, so all members of the household could add things to the list, and all members of the household could retrieve the list on all registered mobile devices.
It could either be ad-supported, subscription, or both. There are enough free sites out there that people might balk at having to have an initial subscription to join the site, but I don't know if it could support itself on ad revenue. Perhaps some of the more advanced features would be subscription? or have a limited subscription list for free users?
The site would need dedicated part-time employees ad-hunting all the local papers and flyers for the current advertised prices. This would be a tedious and huge job, but would be perfect for coupon-clipping homemakers with that much spare time on their hands. There would be a need to avoid duplication and verify the input. This sounds like the sticking point. One solution to that would be to partner with the stores in question and get them to send the flyer electronically to the site, where it could be distributed to whichever person had time to either enter manually or verify that the auto-capture had done its thing.