A source tells me that the Google Earth app will get the Street View feature, currently available only in the browser-based Google Maps service, within a few weeks. What's not clear is whether this refers to general release or internal testing.
Clearly, Google's goal is to offer users the capability to continuously zoom from space down to detailed views of houses and buildings.
Google launched Street View in May 2007 and continues to collect street-level imagery in new locations (including at least one nonurban location, Yosemite). Google has also been collecting middle-distance overhead imagery from airplanes, thanks in part to its acquisition of the aerial camera company ImageAmerica in 2007.
Google's aerial images are seamlessly integrated into Google Earth already, in contrast to Microsoft's Live Search Maps, which forces the user to turn on the "Bird's-Eye" mode to see aircraft imagery. Microsoft has street-level imaging product in open beta testing, but it is not integrated into its mapping product yet.
Both Microsoft and Google are also making a big push to include 3D wireframe models of building in their maps of major cities, and to map photographic textures onto them. Microsoft has shown a technology, Photosynth, that does a very good job of mapping photographs into 3D data models, however it's been widely reported that it's an extremely compute-intensive product, probably too much so to use in a general mapping application at the current time.