Google Earth and KML 2.1 now use the COLLADA interchange format for 3D geometry and textures
COLLADA is an open standard for that defines an XML-based schema for 3D authoring applications to freely exchange digital assets without loss of information. http://www.khronos.org/collada
The Google Eartth news is significant for 3D modelers because (in addition to giving Google Earth the capabilities for 3D textures) it means you can use any of the popular 3D modeling applications including Maya, SoftImage|XSI, 3ds Max, etc 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, you have some pretty high performance 3D visualization capabilities that is compelling to untrained (as well as highly trained) users. It makes viewing 3D models in context, easier and more engaging. Google Earth's 3D look and fell is almost like a video game - and that is a good thing for getting people to see your 3D work!
At this point, Google Earth has not implemented support for animation, shaders or physics. But these are supported in the COLLADA format., so it is likely only a matter of time.
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