SearchEngineLand reports Google defusing Google-Bombs, with a case study of "miserable failure". Google has made an algorithm change "that minimizes the impact of many Googlebombs."
Let the reverse-engineering begin!
Just as a speculation, and not tested much, here's my guess at the algorithm, *something like*:
IF the links to the page contain [BOMB] and
0) There are lot of links with anchortext [BOMB]
1) [BOMB] does not appear on the page or metadata
2) [BOMB] is the most common anchortext in links to the page
3) There are "very few" links of the form [BOMB otherwords]
THEN ignore all links with [BOMB]
This would preserve the ranking of pages talking about it, since they'll have the words on the page, even in the title.
We can test this by adding lots of links with both the expected text and [BOMB]:
George Bush: "Miserable Failure"