I thought it was illegal hosting of copyrighted materials
That's what they say, on the page that was originally linked:
As developers migrated away from Google Code, a growing share of the remaining projects were spam or abuse. Lately, the administrative load has consisted almost exclusively of abuse management. After profiling non-abusive activity on Google Code, it has become clear to us that the service simply isn’t needed anymore.
I'm not sure that their methodology is valid; I'd sort-of expect that activity on "legitimate" pages would be much less than on abusive pages. After all, it's a repository, and its main function should involve letting things sit there.