I don't fully understand it. Are they liable for content made up by their AI? Or are they now liable for content written by others and summed up (correctly) by their AI?

From my reading the German court's ruling is that Google are responsible both for claims they made up and claims they rephrase from somewhere else. Because the claims appear as a statement of fact made by Google. If they showed it as "User X on site Y claims Z" they would not be held responsible. Because that's how search engines are understood to work. If they make a wrong quote, they would be responsible for that though.

So my understanding is their unreliable AI summaries are a legal liability for Google in Germany and people can request corrections through the courts.