remove - 4:00 pm on May 28, 2010 (gmt 0)
Oookay, first of all, ads are only shown on YouTube videos that have been confirmed not to be copyrighted, so it's not like YouTube/Google is profiting wholesale off of copyright infringement. Sure, they benefit by getting traffic that's driven by copyrighted videos, but let's be clear about what's really going on here.
Because of the sheer size of their site, it's logistically impossible to hand-moderate each clip that's uploaded. They actually do have a pretty advanced mechanism for user reporting and also for auto-identifying copyrighted materials in videos. It's actually probably more advanced than what exists on any other video-hosting website, technologically speaking.
The DMCA laws, upon which this case hinges, were written in 1998, at a time when it was impossible to imagine a site like YouTube or Facebook, where administrators were not aware of everything its users were doing. User-generated content (beyond perhaps a geocities "guestbook"-- remember those?) simply was not an everyday thing. The law needs to be updated to reflect the modern realities of the internet.