I must commend Google for stepping up to the plate in the public and webmasters fight against badware. Some time ago Google started to show its users warnings and prevented them from visiting dangerous sites when users completed a search. Most webmasters whose sites were flagged found out from users themselves. When users attempt to click over to a Web site considered to be potentially dangerous, Google shows an alert page that informs them of the possible risk and gives them the option to click back to the results page or continue on to the questionable Web site. However, these alerts sometimes anger webmasters who are convinced their sites don't contain malware.Google flags Web sites according to guidelines set by The Stop Badware Coalition. Webmasters who feel their sites have been incorrectly flagged as having malware need to contact the coalition and request a review.
A few months they integrated malware notifications into webmaster tools and now they are sending out detailed information to webmasters via email.
"Webmaster tools notifications Now instead of simply informing webmasters that their sites have been flagged and suggesting next steps, we're also showing example URLs that we've determined to be dangerous. This can be helpful when the malicious content is hard to find. For example, a common occurrence with compromised sites is the insertion of a 1-pixel iframe causing the automatic download of badware from another site. By providing example URLs, webmasters are one step closer to diagnosing the problem and ultimately re-securing their sites."
They are sending emails to webmasters notifying them of problems with their sites.
"for now we're sending the notifications to likely webmaster aliases for the domain in question (e.g., webmaster@, admin@, etc). We considered using whois records, but these often contain contact information for the hosting provider or registrar, and you can guess what might happen if a web host learned that one of its client sites was distributing badware. We're planning to allow webmasters to provide a preferred email address for notifications through webmaster tools, so look for this change in the future."
The above quotes were taken from the official Google Blog