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Although the photo quality published online is rather low, I would not be surprised if the original captured image was of much higher quality, which likely still resides in a Google database somewhere. I would imagine that Google has plans to apply computer vision algorithms for automatic object detection, 3D-routing, sign reading, sidewalk routing (for people routing, rather than car routing), etc. Thus, there would be little reason for them to invest the money into Street View and not capture the highest quality imagery possible.
Some related links
Wikipedia's Google Street View page has a Privacy issues section as well as a long list of links to articles and news items related to Street View's growth, governmental concerns, and privacy implications:
Privacy advocates have objected to this Google feature, pointing to views found to show men leaving strip clubs, protesters at an abortion clinic, sunbathers in bikinis, cottagers at public parks, parents hitting their children, males picking up prostitutes and other activities, as well as people engaging in activities visible from public property in which they do not wish to be seen publicly.[19] Google maintains that the photos were taken from public property. Before launching the service, Google removed photos of domestic violence shelters, and allows users to flag inappropriate or sensitive imagery for Google to review and remove.[20] When the service was first launched, the process for requesting that an image be removed was not trivial;[21] however, Google has since changed its policy to make removal more straightforward.[22] Images of potential break-ins, sunbathers and individuals entering adult bookstores have, for example, remained active and these images have been widely republished.[23]
Mashable has a Top 15 Google Street View Sightings page including pictures of a possible crime in progress, female sunbathers, and men coming/going from adult related entertainment venues. Some more Street View oddities are listed on this blog post. The New York Times has an article entitled Google Zooms In Too Close for Some, which is also worth a look as it briefly explores the idea of public vs. private and ownership of data.
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