[Update 2009-08-09: See the new entry about the current controversy surrounding Arunachal Pradesh in Google Maps. The below was written in November 2007 and contains outdated information.]
This blog has tracked a good number of stories coming from the more shrill corners of the media in certain countries, purporting to prove how Google’s choice of borders for Earth and Maps is meant to show an intentional slight when the choice goes against their wishes. Such stories have mainly served to show how Google Earth has entered the public consciousness as a reference for such information. It has become important to set the Google record straight.
That doesn’t mean such stories can never have a justified complaint. As this piece by the Telegraph in Calcutta points out, Google Earth shows the Indian state of Arunachal Pradesh as being administered by China but claimed by India. The situation on the ground, however, is pretty much the reverse: Most of it is controlled by India, though the Chinese lay a claim to it.
Here’s the view in Google Earth:

Here is the view in Google Maps:

Strictly speaking, from a neutral perspective, the Maps view is correct. For Google Earth, this would translate to both borders being colored red, perhaps with an orange border depicting the line of control.
But is this coloring intentional? I doubt it. Search for “Arunachal Pradesh” in Google Earth and you will scroll to a location tagged “Arunachal Pradesh India” by Google’s own database. That’s hardly siding with the Chinese.
The article brings us another interesting tidbit, one which I’ve not seen mentioned before: The answer to the question, “How does Google decide the status of borders in disputed regions?”
“Google Earth demarcates its maps according to international standards, following the guidance of the US Federal Information Processing Standards Publication and the International Organisation for Standardisation (ISO) 3166 standards.”
I couldn’t find any actual reference maps based on FIPS, so I can’t tell if in the case of Arunachal Pradesh Google made a mistake. One possibility is that the US officially agrees with China on its claim to Arunachal Pradesh, much in the same way that the US officially agrees with China that Taiwan is part of the People’s Republic.