I am italian, and I live in Italy. And I personally know the president of the association who has opened the warrant against google, vividown (http://www.vividown.org/), and more than anyone else here I know the case, as I can read (I am not a vividown affilate though, but I am friend of some Down's people).
Vividown is an association that takes cares of people affected by Down's syndrome, for anything starting from medical care to relatives support and also legal counseling in various issues.
Vividown has sued Google for only one very basic reason: Google video (at the time, 2006, YouTube was not part of Google Inc) has retained the infamous video of childs that beats up a Down's for *two months*, even if Vividown and other people, mostly relatives of Down's child, has specifically requested to delete it from the Google database multiple times.
THIS IS THE ONLY REASON. That video was seen by tens of thousands people, thanks to the attention of local newspapers, like http://www.corriere.it. And for sure, many of those viewers laugh at that and they dream to beat up them too a Down's child. Many people was outraged of that, and vividown has taken the legal action for this reason. NO internet censorship or whatsoever.
You can read (in italian) the official word from vividown (sorry, in italian) here: http://www.vividown.org/news/Cominicato%20Stampa%20Vivi%20Down%20CI.pdf.
Also, no arrest were made. In Italy, thanks God, not all criminal charges results automatically in jail time. Not only that: even if the case will close in a negative way for Google, the interested people will *not* going to jail anyway, since the resulting (if any) jail time will fall below the minimum required for actual liberty restriction indictement.
And also, vividown do *not want* that Google people go to jail. This has to be understood clearly: IT IS NOT the association desire to censor Google or put a blanket on internet. Vividown want only to avoid that such abuse is repeated again, and that any people/organization has the needed attention to these issues.
In Italy, but I assume in many other places, Down's people is considered inferior, and openly discriminated. Please don't do in internet also!