Google recently launched its own URL shortening service, goo.gl. However, they aren't ready to roll it out for large-scale consumer use yet, so it's currently limited to generating short URLs when sharing content via the Google Toolbar or when using short URLs for feed outputs to Twitter through FeedBurner.
Today, a new extension called "goo.gl shortener" appeared in the Chrome Extension Gallery, which allows you to generate goo.gl short URLs directly within Chrome, even without the Google Toolbar.
You can also visit an online site to generate goo.gl short URLs: http://www.knowsky.com/goo.htm