According to a informative email sent to Gamasutra by a Khronos Group representative, Google Earth and KML 2.1, the geographic markup language for Google Earth, now make use of the game developer friendly Collada Interchange Format.
This is significant because (in addition to giving Google Earth the capabilities for textured 3D) it means the software now can leverage several popular 3D modeling applications including Maya, SoftImage|XSI, 3D Studio Max, Blender, and Sketchup to create sophisticated models with textures, export them as Collada, and then import or drag and drop them into Google Earth.
Combined with the new KML support for LOD and streaming, Google Earth now includes a number of new high performance 3D visualization capabilities. This also opens up the software to the entire creative community, from 3D modelers to artists and architects.
In addition, game developers who are already familiar with Collada (which is an approved file format for the upcoming PlayStation 3 platform) can now start exporting assets to Google Earth. Currently Google Earth does not support animation, shaders or physics, but as these features are supported in by the Collada format, so it is likely to be included in the near future.