Hi cooler,
Your questions are about the full Google Earth application and
SketchUp.
However this is the group for the Google Earth Plug-in Api.
You would probably get more help in either of the groups for these
products.
http://www.google.com/support/forum/p/earth?hl=en
http://groups.google.com/group/sketchup/
That said the terrain is imported in two parts - as an image and a
mesh.
The output format is determined by the user - common formats are
.skp, .obj, .max
Hope that helps.
F.