Will Google buy Twitter? That’s what the rumor mill is all abuzz about today. The news apparently comes from two separate and unnamed sources that claim talks between Google and Twitter are in the late stages, according to TechCrunch’s Michael Arrington. However, Arrington says he has spoken to a third source that claims talks are just in the early stages.

How much could a Google Twitter deal be worth? As high as $1 billion, pundits say.

The timing is ironic given that it comes only a few weeks after Google CEO Eric Schmidt called Twitter a “poor man’s e-mail system” at the Morgan Stanley Technology Conference in San Francisco.

There are advantages to both companies if a deal were to go through. Twitter could finally find a monetization solution through Google’s ad programs. And, given the popularity of Twitter for posting story links, the search engine giant could improve Google News.

UPDATE: TechCrunch is now saying that Google is valuing Twitter at “only’ $250 million while Twitter wants at least $1 billion. The talks between the two companies are centering around Twitter providing a real time feed of Twitter updates which would speed up Google’s search indexing of Twitter substantially.