The Google Mobile Blog announced a new version of Google Goggles now supports translating what it sees. You simply point the phone at the text you want translated, it could be a menu, sign, book or whatever and specify which text you want translated and snap the picture. Then Google will scan the words and attempt to return the translation via Google Translate directly in Goggles.
Google said, Goggles can read English, French, Italian, German and Spanish and can translate to many more languages. They are working towards other Latin-based languages and eventually read non-Latin languages. You can download Goggles v1.1 for free on devices running Android 1.6 and higher.
I have screen shots and a video of how it works below.
Start Screen:
View Screen:
Selecting Text with Cropping Tool:
Google Scanning Selected Text:
Google Offering Translation of Selected Text:
Here is a video demo, I hope the quality improves as YouTube processes the video over time: