HTML:

<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=utf-8" />
<title>ace-template</title>
<style type="text/css">
.keyword{ color:red;}
</style>
<script type="text/javascript" src="js/jquery-1.9.0.js"></script>
<script type="text/javascript" src="js/ace-template.js"></script>
<script id="t1" type="text/template">
$.each(this,function(i,data){
    <li>
        <a href="#{data.url}">!#{helper.keyword(data.name)}</a>
        if(data.items){
            <ul>
                !#{helper.format("t1",data.items)}
            </ul>
        }
    </li>
});
</script>
</head>
<body>
<div>
    <h3>地区</h3>
    <div>输入关键字：<input id="k1" type="text" value="" /></div>
    <ul id="t1out">
    </ul>
</div>
</body>
</html>

JS：

$(function(){
    var citys = [{
        name: "北京市",
        url: "http://baike.baidu.com/view/2431.htm",
        items: [{
            name: "朝阳区",
            url: "http://baike.baidu.com/view/138836.htm"
        },
        {
            name: "海淀区",
            url: "http://baike.baidu.com/view/138838.htm"
        }]
    }, {
        name: "山西省",
        url: "http://baike.baidu.com/view/6204.htm",
        items: [{
            name: "太原市",
            url: "http://baike.baidu.com/view/23736.htm",
            items: [{
                name: "迎泽区",
                url: "http://baike.baidu.com/view/556105.htm",
                items: [{
                    name: "大关帝庙",
                    url: "http://baike.baidu.com/view/1947078.htm"
                }]
            }, {
                name: "杏花岭区",
                url: "http://baike.baidu.com/view/90492.htm"
            }, {
                name: "万柏林区",
                url: "http://baike.baidu.com/view/498669.htm"
            }]
        }, {
            name: "大同市",
            url: "http://baike.baidu.com/view/28133.htm"
        }]
    }]; 
    
    var query;

    /**
    * 高亮关键词
    * @param {String} text 字符串原文
    * @return {String} 返回标记关键词后的HTML字符串
    */
    function keyword2(text){
        var r = AceTemplate.format("#{this}",text); // 原文做html编码
        if(query){
            var t = AceTemplate.format("#{this}",query); // 搜索关键字做html编码
            r = r.replace(t,AceTemplate.format('<b class="keyword">!#{this}</b>',t));
        }
        return r;
    }
    
    var t1 = document.getElementById("t1out");
    var k1 = document.getElementById("k1");
    
    function queryChange(){
        if(query === k1.value) return; // 值没改变
        query = k1.value;
        t1.innerHTML = AceTemplate.format("t1",citys,$.extend({},AceTemplate,{keyword:keyword2}));

    }
    k1.onkeyup = queryChange;

    queryChange();
});

模板中可以调用自身递归输出。
使用html编码输出可以这样：AceTemplate.format("#{this}", text);
通过helper参数，加入keyword方法，JS代码61行中使用了jQuery.extend()函数扩展keyword方法；或者用

AceTemplate.keyword = keyword2;
t1.innerHTML = AceTemplate.format("t1",citys);