From the October Google Webmaster Chat Q &A:

Anonymous: Suppose my website supports English and French.  Should the English version of a particular page and the French version have different URLs?  Any other best practices for multi-lingual site architecture?

Matt Cutts: If you can afford it, I would do domain.com and domain.fr. If that's not possible, I would consider doing en.domain.com and fr.domain.com. If that's not possible, then domain.com/en and domain.com/fr can work. In webmaster tools, you can geographically target a site (and I believe parts of a site such as fr.domain.com), which will help as well.

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