
Google in a blog post gives a bit of background:
The team and technology behind Insert Drawing originally came from the startup Tonic Systems, which Google acquired in 2007 [see post]. The drawing feature that we’ve built relies heavily on a relatively new capability in browsers: the ability to render vector graphics. We use the SVG (scalable vector graphics) standard to accomplish this in most browsers and VML (vector markup language) where SVG is not available. Only recently has the performance and ubiquity of such technology enabled us to deliver what we hope is a delightful feature.
Also see a Google employee commenting on the use of Flash vs SVG+VML.
[Thanks TonyB!]
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