up to and including Android 2.1:
No Arabic support whatsoever. Any attempt to show Arabic text will result in rectangular boxes instead of characters. Applications that wish to support Arabic must include their own Arabic font. There is no shaping support, meaning letters will not connect to each other, but this can be provided by a third-party library. In addition, the diacritics/harakat will not be properly placed and will often overlap, making them difficult to read.
Android 2.2 - Android 2.3:
In Android 2.2, an Arabic font was added (DroidSansArabic), which is the default Arabic font in Android until Android 4.0. still no shaping or diacritic support.
With Android 3.0, shaping support is finally added, so now the Arabic letters will connect without the aid of a third-party library. Still no diacritic support.
The default Arabic font is changed to Droid Naskh, and another Arabic font is added to replace DroidSansArabic: Droid Kufi. Still no diacritic support.
Finally, full Arabic support, including support for diacritic placement!