Creating Google friendly URLs is one of the low hanging fruits in SEO world which can yield great results if utilized well. The url structure has a key role to play along with other attributes like Title, content, Headings etc. A better URL structure not only helps user making it easy to read and remember, it also gives google bot a sign that the page URL contains what the content is out there on the page.

What is a google friendly URL ?
- Google Friendly URL is one that is structured well, does not contain dynamic parameters like session id etc, matches the content on page and most importantly is keyword rich.

Let me start by examples, Take a look at this URL that talks about a carmodel named "Maruti Alto" in India - http://www.cardekho.com/carmodels/Maruti/Maruti_Alto - Note that the organization of URL is such that it clearly indicates a directory kind of structure with OEM name(Maruti) first and then its model Maruti Alto. Few important points about this URL :-
1) Google prefers - more than _ so please note that this URL is not the best example for this.
2) The search keyword this URL is trying to target is "Maruti Alto" and hence you can see that the last part of the URL is Maruti_Alto indicating its keyword rich. Let me take another example of car called chevrolet optra magnum in India - http://www.cardekho.com/carmodels/Chevrolet/Chevrolet_Optra_Magnum - This URL should probably have been ending with just Chevrolet Optra as in India people know it more with name optra than optra magnum. Try using keywords that are more searched for while making it relevant to the content on page.

3) Te structure of the URL is /carmodels// - Easy for the user to read and matches the site content structure as well. The other URLs on site are also consistent with this structure for eg :-

for Hyundai I10 car it is http://www.cardekho.com/carmodels/Hyundai/Hyundai_i10 , and for Tata Nano it is http://www.cardekho.com/carmodels/Tata/Tata_Nano - Note that Maruti, Hyundai and Tata are the car brands while the last part in each name its respective models.
4) The URL passes on its dynamic Parameters Maruti and Maruti_Alto as part of URLs. At the backend the URL is rewritten and the dynamic attributes are extracted. For learning more on Rewriting URLs read Apache URL Rewriting and for those of you developing sites using java a URL Rewriter from Tuckey is good one.
5) The number of levels in the URL are less than five that is /carmodels formed level 1, carmodels/maruti formed level 2 and finally Maruti_Alto formed level 3. The maximum levels we should have is 4.
6) No use of session id in the URL structure. This url does not contain any reference to session ID. Session IDs are generated dynamically at server end and the server associates an instance of browser to that ID. It is used to identify on request whether it came from same browser, if ID is same then it is indeed coming from same browser. This URL example did not require session ID as it does not depend on any such information. Using session id in such cases is useless and makes the URL search engines unfriendly as well. Having session ID in URLs can also cause problems that the same content can be indexed with multiple different urls and all urls just differ in their session ID parameter. This can lead to massive content duplication issues. Session IDs in URLs is complete no no. In case you cant get away with session based information it is recommended that cookies be used instead of appending the session id in URL.
7) URL does not contain any %20 type characters - whitespace in url gets converted to such characters - Avoid whitespaces in URL.

8) Making the url keyword specific to what the page contains will make sure each of your page is unique. For eg. Chevrolet Optra comes in 6 variants India - Lets take a look at three urls of such optra variants Chevrolet Optra Magnum 1.6 LS Petrol, Chevrolet Optra Magnum 1.6 LT Petrol, Chevrolet Optra Magnum 2.0 LS - Note that all three are very indicative of what each one is talking about on page. If its the 1.6 LS Petrol version its clearly indicated in the URL. Google will crawl each URL and find it meaningful to the content being displayed on the page. If its the 1.6 LT Petrol version then it has the same in the URL. This helps in qualifying the URL in a meaningful manner. Its much better than having brand=chevrolet&model=ChevroletOptra&Variant=3 or something on those lines.

Take a look at this example for Used Maruti Cars - http://www.cardekho.com/used-cars/used-Maruti-cars.htm - This follows all above points mentioned and in addition has seperation using '-' (hyphen) instead of '_' (underscore) which makes it a better url than the previous one.

Finally a lot of factors contribute to getting your site link ranked high in google search, URL is one of the important ones. URLs once created would rarely change their structure as they would be linked to and indexed with the structure they go live with. It can be an nightmare to do this activity as an afterthought. Make sure to do this as step 1. In case you already have an existing site and you want to make your urls google friendly and still retain all the value(page rank, links et al) that was in there in old urls you can do so by specifying a permanent move status on the page in apache configuration files. Ensuring a good google friendly URL is step number 1 to success.

The official google webmasters link on this topic is http://www.google.com/support/webmasters/bin/answer.py?hl=en&answer=76329 (Note that the URL which talks about it is not the best example of good url structure itself ;) )