Google released a chat translation thing today. However in my opinion the implementation is really sloppy with the use of a bot. I suppose a possible reason they are doing this is just to show that one can hook bots into GTalk etc so perhaps it isn't really the fact that they wanted to add translation in a user friendly way.

Brent was messing around with translation for BlogChat back in 2002 and had it working in a much nicer way. See his post on it here.