Does anyone know if Google Maps consider elevations and the actual path on earth to calculate distance between two points or it only considers geographical locations for distance measurement?
If you are referring to using google.maps.DistanceMatrixRequest then yes, it considers the actual route when calculating distance, based on the option provided in travelMode
code.google.com reference
When there is no established route (at least known to google) i'm sure (from experience) the response is the distance 'as the crow flies' between 2 lat/long locations. [experience based off making the request for a path that bisected a large lake]