How do countries like China ban sites such as youtube that violate their laws? Do they take it on faith or are there some technology aspects involved with government servers or something?

(I'm mostly clueless here, this is my first school project question.)

Probably both, but more technology than waiting for people to report sites. All of the major search engines were involved at some level or other. When you think of the scale of the 'problem' ... it would have to be a technical solution.

Well, for my project question, it gives the example that Germany bans hate sites, and it's asking specifically how would a country go about combating crimes that span the globe? (Due to the fact that each country has it's own set of laws)

So....
is there an agreement made between the country and website owner (or search engines) as in a contract? I'm guessing it's referring to smaller sites here too, like those hate sites.

On the technical side, are there certain permissions configured on the server? Or does the web host come to meet these arrangements? Etc.

They call it the "Great Firewall of China". Remember that China is a communist state, so the state owns all of the internet service providers. The same way that your school probably filters out playboy.com through a firewall or proxy (websense and the like), china implements the same thing on all routers that lead outside the country. Also I'd bet that all of the DNS servers in China have records for those sites removed. As far as deciding which sites to block, they're done on a case by case basis by teams of people whos job it is to find sites that are "objectionable". I believe there is probably some automatic filtering that goes on also. I'm sure as soon as a website has the words "save tibet" in it, it gets banned. It's a huge undertaking and I'm sure even more technologically complex than I've described.

it would be as easy as set htaccess to deny from all, allow from china and then order all upstream providers to implement that htaccess at the root

Ok that would only work if every single website operator who ran their sites on Apache agreed to make their website inaccessible to Chinese IPs. Then of course what about the sites running on IIS?

How blocking of "objectionable" sites is normally done is as Keith (mork29) says, by redirecting at the DNS level or proxying.

For example; I run my own DNS caching server on my local network and have a lot of sites that I point into a local server, so they do not look outside the LAN for the real site, it's mostly pr0n and gambling sites (a 12 yr old & a 7 yr old with their own machines ) but I also have intellisense on a wildcard DNS so we don't get to see the annoying popup boxes that appear on many sites.
I also have a proxy server locally that has a list of disallowed URLs but the adults in the family can bypass that

It's just the same thing that is done in China but theirs is on a much bigger scale. And because the government control the internet gateways and ISPs it relatively simple to implement and enforce.

AOL can do a similar thing with their proxies and parental controls, usernames that are set as minors can get directed through different proxies with more filtering in place.