This is an interesting move by Google but not completely off the rocker for them. Last year they blocked search results from the co.cc domain because they believed they polluted the search results.
Google plans to penalize overly optimized sites because they want to level the playing field for other websites who do not concentrate on such efforts. Basically there are sites out there that completely focus their efforts on SEO and not content and those results would rank higher than sites that don’t focus on SEO.
Google Engineer Matt Cutts explains the following: “We are trying to make GoogleBot smarter, make our relevance better, and we are also looking for those who abuse it, like too many keywords on a page, or exchange way too many links or go well beyond what you normally expect.”
The search engine at Google is about to go through a major overhaul and de-prioritizing sites with heavy SEO is just a small part in the big picture to bring better search results. The changes to the search engine will be coming in the next few months.