With the debut of of iPhone 2.0 software, you can enable the Camera app to geotag your photos on the iPhone 3G. To enable this on your iPhone, click the Settings icon > General > Location Services.
Once you've done this, all photos you take on the iPhone are assigned a location. You can then upload these photos to Picasa and then port them over to Google Earth using the geotagging feature of Picasa.
This saves you the step of manually geotagging your pictures. Plus, your family will be hugely impressed when you show them photo albums in Google Earth :-)