Four potential options for interpreting this image (via Reddit, via djacobs). (You may want to click and view it in a larger size.)

A real woman was in real labor in her real car and pulled over in front of this real house on this real street and gave birth to a real baby which was held up just as the real Google Street View car came by and snapped this photo. Real people knew the street view cameras were making their way through this real neighborhood, and they staged this event, and raised up a real doll up from the real sidewalk just as the Google Street View car came by and snapped this photo. A real woman was in real labor in her real car and pulled over in front of this real house on this real street and gave birth to a real baby which was held up just as someone across the street snapped this photo. Then someone used a real copy of Photoshop (or something similar) to add details that simulate the effect of this photo being snapped by a Google Street View camera. Real people staged a birth on a real street, and help up the real doll just as someone across the street snapped this photo. Then someone used a real copy of Photoshop to add details that simulate the effect of this photo being snapped by a Google Street View camera.

If you plotted the real / fake options on a 2x2, it'd look something like this.

Each of those quadrants is impressive on its own merits. Starting in the upper right and working clockwise...

Real baby / real Google: wow, what a coincidence. Fake baby / real Google: wow, nice stunt. Involved not an insignificant amount of planning...least of which is understanding just when that street view car would come by. Fake baby / fake Google: wow, nice stunt. Involves getting people out on the street, staging the scene, snapping the photo, doing the right Photoshop work, and seeding it in the right communities where it finds its way to, you know, bloggers. Real baby / fake Google: wow, creepy. Amazingly, impressively creepy that (a) someone would grab this shot and then (b) do the right Photoshop work, seed it in the right communities, etc.

I honestly don't care which quadrant this item actually lives in. Because even if this is a faked baby with a faked Google street view, it's still real.