A post on the official google blog states that there have been systematic attempts to read gmail accounts from Human Rights Activits.
As a result(?), they have decided to stop censoring stuff in their Chinese search engine, even if that means they need to withdraw from China. The crucial bit is:
These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.
Wow, Google has balls in the end. Congratulations to that decision.