I am a permanent resident in the US and am planning to take 2-3 weeks and visit germany and italy. The german consulate website says that I need to provide proof of hotel reservation. Do they only need that for my stay in germany or my entire stay including the time spent in italy? anyone have experience with this issue?
2-3 weeks is not a problem, you only need a visa if you are staying longer than 90 days in the Schengen area. There is no need for you to get a Visa.
Unfortunately I believe I do. I am not a US citizen, only a permanent resident.
You're very lucky that you got a green card, otherwise you would have to go through the full Schengen visa process which is very hard to do and almost impossible unless you go somebody on the other side acting on your behalf, signing the invitation papers and giving securities for you.
My advice is to book your flight tickets, make all your hotel/hostel reservations online and submit copies of this along with your visa application. You will also need to show proof that you hold a steady job in the USA and intend to return at the end of your stay.
So yes, it is necessary that you show proof of hotel reservation for your whole trip. It is best if you can show that you already paid money on those hotels/hostels.
If you are staying with friends or relatives and this is the reason you do not have hotel reservations, have your friends contact the consulate in question and ask them what they can do.
If these friends live in Germany, let them go to "Auslaenderbehoerde" and ask there about the visa process for you. (I only know it for "regular" Russians, those who live in Russia, and who want to visit relatives in Germany. Isvinitye!)