Wasn't Dropbox involved in a pretty big privacy scandal a year or two ago when people found out they weren't encrypting their files properly or something?
I believe Dropbox create a hash for all users' files that point to a single file hosted on Dropbox, so Dropbox save the space that would have been occupied by the - according to them - redundant files. You could say that a Dropbox repo is like a list of references to non-redundant files hosted by Dropbox.
In finding any disagreeable content, I believe the implication was that Dropbox could map it the other way around from the infracting file to a list of users with the file's hash.
People that never looked at what dropbox does were shocked that dropbox has the technical ability to look at file contents. All encryption is done on the dropbox servers.
