Google Maps for Android API v2 doesn't work on the emulator out of the box at this point in time. It may work with a bit of setting up YMMV, see - This app won't run unless you update Google Play Services. (via Bazaar) .
Your best option is to test on a real device until Google fixes the issue. Please star the bug - http://code.google.com/p/gmaps-api-issues/issues/detail?id=4627.
I finally found the correct fix for this. Since I was using maps in a Fragment in a two pane layout; I had to programmatically construct the map instead of defining in xml. This is demonstrated in the maps example ProgrammaticDemoActivity in android SDK (googleplayservices).
Below is excerpt from the example, this is called from onCreateView when called from a Fragment (or onCreate if you're calling from an Activity).
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