aakk9999, the moderator at the Google forum at WebmasterWorld spotted that Google's John Mueller said that Google may display the redirect URL in the search results over the destination URL, when they deem it is appropriate.
What this means is if you are redirecting URL A to URL B, Google may decide to show URL A in the search results over URL B.
It is interesting to note that Webmaster Tools just updated to show the destination URLs in the crawl errors.
Why would Google show the redirected URL over the destination URL in the search results? John said, the redirect URL may be "actually a nicer looking URL or we have more signals pointing to that URL, maybe canonical, maybe a lot of links pointing to that URL."
Here is the video where John answered this at about 46:37 into the video:
Here is the transcript by aakk9999:
Q: And then shouldn't be that the target is part of the Google's index and not the first one? Because some pages are not basically indexed although they are the target of 301 redirect.
A: That depends a bit on which how we actually index that, so what would happen here is we would crawl and index all of these pages and then we might see that one of these URLs is actually a nicer looking URL or we have more signals pointing to that URL, maybe canonical, maybe a lot of links pointing to that URL and we will actually show that other URL, the one that is still redirecting instead of the final destination URL in Search Results.
So oftentimes we'll see that, especially from URLs that redirect from the root of the domain to the lower level page and we try to show a more reasonable URL in Search Results even if we know that it actually redirects somewhere else in the end.
So it is not that there is anything technically wrong with that kind of setup but you might see that we just show one of higher level pages instead of the lower level URLs just because it looks nicer in the Search Results.
Forum discussion at WebmasterWorld.