Yes, it appears they use the aerial imagery to build out and texture map 3d models of buildings, but only in select areas, and not in that many areas, honestly. Around me, none of the area is supported. They simply take the satellite view and use it as a texture map for a 3-d modelled elevation map (so you can see the major elevation changes very roughly modelled, but that's about it). Even in a big city like Chicago, they seem to have a it supported for 10-15 miles from the shore of Lake Michigan, but after that it reverts back to a crappy perspective view of the satellite imagery.
Bing, on the other hand, appears to have the aerial photography in a LOT more places. At least in the cities I've dealt with, they seem to have pretty much everywhere. But bing isn't better everywhere. Just as an example, I picked some far off little farm in the middle of nebraska, a ways from any major city. Bing's aerial view there is pretty crappy. Google satellite imagery is MUCH higher resolution.
So it's really a tradeoff, depending on what you are looking for. For that reason at least, I like having 2 options. Near me, bing often has the better imagery, and I'll miss it for that.