The specific patents involved: 6,125,447; 6,192,476; 5,966,702; 7,426,720; RE38,104; 6,910,205; and 6,061,520. Oh, and they also claim copyright infringement to boot.
Is this a legitimate lawsuit? Is Google going to have to retract portions of Android or Dalvik? I could see Google trying to out-technology Oracle to solve the patents just out of spite, even if that has a big slowdown to the growing Android community. I don't know, and I'm not a lawyer. But I did read through the patents involved, and it seems that there are three groups of complaints.
One is on security mechanisms and resource protection of Java. That one seems like it will be hard to defend against, since Dalvik mimics much of the Java mechanism.
The other is on how class files are processed and packaged. My guess is that Google could probably get around this one without too much trouble by redoing their tools. You already have to recompile Java anyway for Android, why not redo how class files are handled?
The third area is around how the VM optimizes instructions. Parts of the claimed patents seem easy to avoid, but others do not. This could be a difficulty to work around, but I'm not certain.
Of course Google's other option is just to pay Oracle off. Would Oracle ask for an injunction on shipping Android devices to spite Google? Don't know. Either way, I suspect there will be interesting times ahead for the Android ecosystem.