A friend (now at Google) responds:
"Mike, obviously I cannot talk about Google internals, but what did we do about content violations at AOL?"
OK, this isn't entirely true. There was that big flap with the EU over their different definition of the age at which a child is subject to parental controls. And then we spent weeks coming up with a solution to the problem of what should happen to group content if a group founder/moderator leaves the online service.
But mostly, content issues weren't our problem as software designers/engineers. The recently passed (at the time) DMCA had a "Safe Harbour" provision - which basically states that a service cannot be liable for infringement by its members if notified of content offenses and takes the offending content down/offline in a reasonable amount of time. Ultimately, this was our solution to any legal issues that might arise. We left it to the legal team to sort out what was or wasn't illegal content, and provided tools to operations staff to actually remove the infringing material.