Duplicate filter/penalty The Bare Facts by Google himself on Official Google Blog

Here a the plain facts about duplicate filter/penalty written by google on the official google blog:
http://googlewebmastercentral.blogspot.com/2006/12/deftly-dealing-with-duplicate-content.html

It is written for the normal webmaster, so most people will understand it.

I’ll paste some interesting parts:
—
Duplicate content generally refers to substantive blocks of content within or across domains that either completely match other content or are appreciably similar.
—
This means that even small pieces of texts (paragraphs) can be detected as duplicate content.

—
In the rare cases in which we perceive that duplicate content may be shown with intent to manipulate our rankings and deceive our users, we’ll also make appropriate adjustments in the indexing and ranking of the sites involved.
—
If you intentionally put duplicated content online then it will be filtered in the best case, meaning your content won’t be listed in the search results. In the worst case it will effect the ranking (the position of your site) and the ranking of any sites which link to you.

There is much more interesting stuff on their blog post about content duplication. Please note that this is a official google blog post and statement, which most likely is the truth:
http://googlewebmastercentral.blogspot.com/2006/12/deftly-dealing-with-duplicate-content.html