Stefano Mazzocchi: Today Google released the Android code and I took a serious look at its internals... and found the solution for the licensing problem. It's called Dalvik and it's the new name of Sun's worst nightmares.
Dalvik is a virtual machine, just like Java's or .NET's.. but it's Google's own and they're making it open source without having to ask permission to anyone (well, for now, in the future expect a shit-load of IP-related lawsuits on this, especially since Sun and Microsoft signed a cross-IP licensing agreement on exactly such virtual machines technologies years ago... but don't forget IBM who has been writing emulation code for mainframes since the beginning of time).
But Android's programs are written in Java, using Java-oriented IDEs (it also comes with an Eclipse plugin)... it just doesn't compile the java code into java bytecode but (ops, Sun didn't see this one coming) into Dalvik bytecode.
So, Android uses the syntax of the Java platform (the Java "language", if you wish, which is enough to make java programmers feel at home and IDEs to support the editing smoothly) and the java SE class library but not the Java bytecode or the Java virtual machine to execute it on the phone (and, note, Android's implementation of the Java SE class library is, indeed, Apache Harmony's!)
I haven't looked inside Android, but I trust Stefano's description. And I believe we are seeing fruits of The Third Fork From Sun that I outlines 215 days ago.