The Times of India reports that after Indian officials nearly banned Google Earth when they became aware that it gave users access to parts of India where there are sensitive military/government installations. As it turns out, Google was able to come to an agreement with the Indian government and will begin "electronically camouflaging" these sites so that users will not be able to find them unless they know exactly what they're looking for. Google will also distort the size and structure of sensitive buildings (or even add buildings where there are none) for freedom, glory, and justice.
I know Google is stuck in between a rock and a hard place on this one, but I'd like to think that if something like this came up in India or China they would take the heat instead of curbing. I guess some information is better than no information. Terrorists aren't going to use Google Earth to plan an attack on a government installation.