Michael Jones - CTO for Google Earth - just made a presentation at Where 2.0. He announced that Google is acquiring Panoramio - the photo hosting company which has been using Google Maps and Google Earth to allow people to upload, geotag and share the location of their photos. Google first demonstrated their interest in Panoramio by adding them to their Geographic Web layer inside Google Earth. This was such a successful addition to Google Earth that over a million photos were added to Panoramio in less than 5 months. This clearly demonstrated the powerful usefulness of tying photos into the geospatial domain, so Google has decided they should bring that capability in-house. Congratulations to Joaquín Cuenca Abela and Eduardo Manchón Aguilar who co-founded Panoramio!

[UPDATE] Here is a blog post from the co-founders of Panoramio about the acquisition. And here is John Hanke's Official Google Blog post on the announcement.