Hi Tim.
I use google earth alot (free version), for about 2 years I think, but I don't really know how it works. However, I do know that it uses satellite images and it downloads more images as we look around. Maybe they get the images from places like NASA?
Edited: new images -> more images
Also, for the "street view" in google earth and google maps, they drive around cars with (( BIG )) cameras on top to take pictures of the streets and houses.
You can see them here. I never saw one yet, but I think it would be neat to see.
Take care,
James