Mobile advertising network AdMob has released its metrics report for March 2010, taking a closer look at Google’s Android OS and its increasing share of the mobile market. The report also reveals that the Motorola Droid is the leading Android handset.

The number of Android devices available as of March 2010 is vastly greater than the number available just seven months ago. AdMob notes in its report that in September 2009, two devices — the HTC Dream (or G1) and the HTC Magic (the myTouch 3G) — accounted for 96% of all Android traffic. As of March 2010, 11 different devices accounted for 96% of Android traffic.

Check out this chart, which shows which Android devices are generating the largest amount of traffic:

The Motorola Droid is the big winner, responsible for 32% of Android traffic in March 2010. Conversely, the Google Nexus One only generated 2% of Android traffic. Looking at the full data from AdMob’s report, it’s clear that although the operating system has really only made waves in the U.S., the Droid is the undisputed Android champion overall. To us, this speaks volumes about the power of Verizon’s network.

iPhone Still Leading the Pack

However, it’s important to note that even though the iPhone is still the smartphone and mobile device leader (even if you add up all other handsets collectively based on OS, iPhone is still in the lead), breakout successes on other platforms could easily change things.

Android OS Fragmentation?

This presents some hurdles for application developers who need to either make OS-specific versions or ensure backward compatibility across all major OS versions.

AdMob’s report shows that Android use is split across the three major releases of the platform: Android 1.5, Android 1.6 and Android 2.0/2.1. Android 1.5 has 38% marketshare — which makes sense, considering it is what most of the older Android devices still run — Android 2.0/2.1 has 35% of the market and Android 1.6 has 26%.

The problem for end-users is that the version of the OS you receive is largely dependent on the manufacturer of your phone and its relationship with your wireless carrier. Verizon Droid owners got Android 2.1 in the middle of last month, a relatively short wait for version upgrades. However, it’s not clear how long updates will take for the Droid or any other Android handset not manufactured in partnership with Google.

Could the Google phone be the death of the newly released Android?? The HTC-built device called the Nexus One was handed out to Google employees last week in the “mobile lab”. The rumor is that these phones would be sold unlocked directly to consumers.

The million dollar question is: How would Google bring an unlocked phone to market? There are really only three ways to sell phones.

1. License spectrum from a carrier and become a mobile virtual network operator or MVNO — a business model that time has proven to be a failure.

2. Of course, is to partner with carriers and offer phones at discounted prices through carrier subsidies, which is more or less the case with every successful device on the US market today.

3. Sell unlocked devices at full retail price that can be used by consumers on the network of the their choice. This is allegedly the model Google will be using to sell the Nexus One.

Stay tuned… we’ll see when and if the phone comes out to the market anytime soon.