In the short-term IE6 users won't see much difference, IE6 won't be blocked, it's just that the youtube devs won't test against IE6 compatibility in the future.

But there's a very real potential not just for "new features" to be unusable for IE6 youtube users but for the entire layout of the page to be broken for IE6 users, rendering the site unusable. Who knows if that will happen but youtube (aka google) is saying now that they don't care whether or not that happens in the future, it's the users' responsibility to upgrade to a more modern browser if they have that problem.

That is indeed very significant.

Where did Google say they wouldn't test it in IE6?

AFAICT, they're not going to let it become unusable for IE6 users. That would be silly, because they could just create a IE6-only stylesheet with "display: none" for everything on the page except the Flash video player. A lot of users would actually consider that a significant improvement.

They have made Adwords pretty much unusable in IE6 but they are unlikely to make a user-centric site like Youtube unusable.

There is this lightbulb you can click that sort of does that. I think it's a relatively new feature.

Do they display that nag screen when you next visit a youtube page once "Continue to Video" has been clicked?

Hopefully, the user gets some sort of warning that their browser is unsupported every time they visit. I suspect even the most complacent of users will want to upgrade if the nag screen is still in their face.

I'm fairly certain that for most IE6 users, the reason isn't complacency (or even ignorance). It's lack of control - corporate environments with "business-critical" ActiveX controls (yes, really), kiosks and so forth.

In my experience, it's less business-critical stuff and more "we don't want to pay for new boxes until the hardware physically dies"