"Facts" I have read, please correct me in what is wrong, incorrect or missing.
#1 Google suspected MS/Bing of straight copying their search results.
#2 Google setup a honeypot like system. Landing pages indexed bogus terms in their system. Essentially noise, that would not exist previously as a search term in either system
#3 Google used a web browser, with the Bing toolbar to navigate bogus search terms
#4 In turn, this user activity was used to cross link a term entered by the user to a web page in MS/Bing's system.
So this opens up the can of worms about user privacy, content ownership (lets drag up the deep linking hysteria of several years ago), morality/legality etc etc etc.
But how exactly did Bing violate Google's terms exactly?
Did Google invalidate their own data by simply using the bing toolbar? Accepting legal terms of the toolbar, device, OS by using it?
Who "owns" the content the user "created" by typing in a search term and clicking a link?
My position is that it's simpler to assume that Bing were spying on Bing users regardless of what page they were on, a side-effect of which is that Google had a lot of influence over-all, especially noticeable on 'long tail' queries.
"How exactly did Bing violate Google's terms". I don't know.
"Who "owns" the content the user "created" by typing in a search term and clicking a link?" Good question, I don't think there can be a definitive answer to this. Google can make a decent case that they own it (just like they own the directions given between two points on google maps, it's a consequence of their algorithm). But I think that's missing the point that, if I'm right, Bing weren't just targeting Google, they were targeting everyone.
Obvious sarcastic reply: "Oh it's all ok, Bing were spying on everyone guys, not just Google users, yay!" but that neatly brushes under the carpet the fact that everyone who runs a website spies on their users to some extent. This underpins the entire business model of most web businesses, especially search.
Hence why the last line of the official blog post on the matter is "we'd like for this practice to stop," and nothing stronger. This is PR, not litigation.
I'm not sure that's the issue here. Unless I've misunderstood, what Bing is doing essentially lets them duplicate whatever improvements in results that Google innovates on. Google doesn't want Bing to reap the benefits of their hard work and money spent on improving their tech. I believe what Bing is doing is preventing Google from competing on a technical level. Honestly though, I'm still a little lost myself. There is a lot of back-and-forth going on here so it's difficult to distill the facts and weed out what is simply opinion.
I find this bickering between Google and Microsoft amusing. Instead of the concerted public humiliation, a simple private call to Dean, and a public "Yeah, they copied us, and you know why" would suffice.