Google Earth added a new feature on October 11th, 2007 which allows YouTube videos to be embedded at geographical locations. Users can now view videos in Google Earth's Featured Content Layer Folder. Users can click on the YouTube button, and icons will start to appear around the globe. More videos will appear when zooming in to a specific location, and can be played in Google Earth or on YouTube. The later lets you view videos from Youtube which have been geo-tagged (during uploading process at Youtube).
Google Earth's chief technologist, Michael Jones, said, "Our vision here is all about the sense of place. Photos show the local view, but videos add the sense of life. The combination of Earth's 'where' with YouTube's 'what' makes the combined experience that much more complete and compelling."
If you want your YouTube video to appear you need to map its location and allow embedding of your video. Google will periodically update the layer to show the latest videos (based on past experience with other layers this may happen every 30 days or so).