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In the Android AVD manager (or a new project for that matter), it will give two options for the same API level. For example, for Level 7 (2.1) it will show "Google APIs - Level 7" and "Android 2.1 - Level 7" in the selection drop down. What, if any, is the actual difference between these two and why would I want one over the other?
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The former is called SDK Manager, which integrates easy updates for the Software Development Kit (SDK), including tools, platforms, and other components into packages. The latter is AVD Manager, which allows you to create and manage Android Virtual Devices (AVDs). AVDs are basically device emulators.
The Google APIs include some Google apps such as Google Maps for instance. If your app will make use of some of the Google API's then of course, you would want to run the Google Api's in the emulator. If you aren't planning to use the Google API's it certainly doesn't hurt you to run Google API's in the emulator, so that is generally what I do.
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Google APIs Add-On is an extension to the Android SDK development environment that lets you develop applications for devices that include Google's set of custom applications, libraries, and services. A central feature of the add-on is the Maps external library, which lets you add powerful mapping capabilities to your Android application.
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