There are two things going on here. Raster images that are overlaid must be in Google's Mercator Projection, correct. However, when you provide shape data (polygons, points, etc) to Google's API to be rendered on the client, the JavaScript code transforms the points to the screen projection before being overlaid.
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There are two things going on here. Raster images that are overlaid must be in Google's Mercator Projection, correct. However, when you provide shape data (polygons, points, etc) to Google's API to be rendered on the client, the JavaScript code transforms the points to the screen projection before being overlaid.