Does Google do anything with the data it collects from those using Android Navigation? That could certainly provide enough realtime data in some parts I would think.
Yes, absolutely. I've seen the traffic status change from green to red for my stretch of road when I was stopped in traffic for a while I was running their Android navigation app.
That may be the case, but I don't think the data is actually used to route you. I missed an exit once and had my estimated transit time drop by 20 minutes, as it was going to put me on a heavily clogged highway. It knew how the traffic was too, since my traffic light changed as well, from red to green.