It's not a big surprise that when the first Google Android-powered phone was announced today, it included news of a built-in compass. Alongside that, it's no less surprising that Street View would have a compass mode, in which it would rotate its view as you did. It's not like it's that hard to implement. Yet the results are very nice, as you can see in this video:
But like I keep saying again and again, wouldn't it just be so great to have imagery taken in real-time, while you're standing there, and augmented with more interesting things in addition to the straight-line street markers? It's high time I either get me an Android-powered phone or figure out where to do a Google internship so that I can work on this myself!