Here's what allegedly happened:
http://www.timesonline.co.uk/article/0,,28783-2263995,00.html

Quote:
As L’Equipe summed up the moment of madness with a headline of “Regrets Éternels”, a day of endless questioning began. With many conflicting versions of events circling on the internet and in the world’s media, The Times enlisted the help of an expert lip reader, Jessica Rees, to determine the precise nature of the dialogue that caused Zidane to react in such a manner.

After an exhaustive study of the match video, and with the help of an Italian translator, Rees claimed that Materazzi called Zidane “the son of a terrorist whore” before adding “so just f*** off” for good measure, supporting the natural assumption that the Frenchman must have been grievously insulted.