Update: August 13
Tech Republic has a similar story on the matter by Scott Matteson, generally supportive of how Google handled this. See the comments, also often supportive. People have been arrested after film developers called police for manual films to be developed, and sometimes the standards are subjective and carpricious. Is a baby nude picture taken by parents really child pornography? I've seen a very few shots in smaller films (with parents present), in commercial distribution (such as a circumcision scene), that might fit someone's definition, although they obviously weren't taken with the intention of eroticism or with abuse of children.
Update: August 16
The Washington Post supports Google on this, saying it is complying with federal law, editorial. "Google's Careful Watch", here.