Brand-spanking new from the UCL Centre for Advanced Spatial Analysis (CASA) comes the Google Earth Photo Overlay Creator, a free program to aid in creating PhotoOverlays, photographic images you can embed into Google Earth to correspond to the actual view. While you can do this to a limited degree from Google Earth, and can also do it directly in KML, the GE Photo Overlay Creator simplifies the job tremendously. It also lets you “tile” a large image, similar to tiled Ground Overlays, so that it loads in only the image information necessary for that particular view. This reduces both the bandwidth and computational requirements, particularly for large images.
The program is Java, and will run in Windows, Macintosh and Linux (check the readme.txt file for info; see this Digital Urban post for a full instructional tutorial). Full support of all image formats requires that you have Java Advanced Imaging installed.
Added 11/6/07: The Google Earth Blog links to another tutorial on this tool at GELessons.