Since it's the Reg's resident conspiracy theorist Andrew Orlowski doing the labeling there, it's best to take it all with a grain of salt.
Orkut appears to be Google-funded only inasmuch as Google allows its employees to work on personal projects for a certain percentage of their week. Orkut's founder, Orkut Buyukkokten, appears to have been interested in social-networking sites for a while, having built Stanford's Club Nexus friendster-alike. Buyukkokten and others published a paper on their findings from Club Nexus, which was published by First Monday here.
Since Buyukkokten has been working on social networking for a while, and since Orkut's look and feel is about as anti-Google as you can get (contrast Froogle, Google Labs), it strikes me that Orkut is more about its namesake than about Google.
You can find out more about Buyukkokten's own interests here.
(Also, you may be amused to note that Orlowski describes Buyukkokten as a "former Stanford graduate", again confirming that the Register's editorial style revolves around a lack of editors.)
It will be interesting to see what effect this has on Google, since it isn't a particularly polished effort. I can't think of any immediate reason to for Google to avoid being connected with Orkut, but Google knows the value of reputation, and I can't picture them being particulary comfortable having Orkut labeled as "Google's Friendster".
Edit: I've been informed that "Orkut" is Finnish for "orgasm", making it pretty clear that this didn't make it through the Google machine before going live.