I came across this graph representation here explaining in simple terms how Duplicate Content penalties work. The idea of a penalty is a myth but in fact google is simply disregarding pages that have already been created. It sure helped me understand it a little better
Good point. It is a good high level explanation, but there are many nitty gritty issues surrounding duplicate content. How much of the page is duplicate? How much of the page is unique? How trusted is the domain? Even though example.com and www.example.com are the same page, Google can see them as two separate pages. Really gets you thinking...
I will tell you a simple example, look at answers.com its a complete page by page word by word copy of wikipedia, and they are ranking second after wikipedia for every search term and their home page is pr 8 while wikipedia is pr9. better xample than this?
Regarding duplicate content, there are so many issues involved. I had explained many times that if SEs won't penalize/ignore duplicate contents.