From the official Google blog:

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.

The not so subtle subtext of the post is this: why should Google play nice for the Chinese government and operate a special, censored version of Google, while Google’s infrastructure is under attack from what are probably Chinese government agencies?