In short, the controversy surrounds his reaction and response to sexual abuse allegations of members of his staff. By allegedly not taking taking more action with what was reported to him was enough, in the eyes of the University, to part ways with him. The likely fall out from this will be increased attention to the matter, fueled by media and university and law enforcement reaction, and soon to likely follow will be the shotgun blast of law suits against Paterno, his staff, the university, etc.
Regardless of what actually happened, or where Paterno's actions lie on the spectrum of proper and improper, he is faced with years of either paying out judgments to the alleged victims, or negotiating settlements with the alleged victims, or defending his actions and trying to avoid paying the alleged victims. Not forgetting the tragic effect all of this has on the alleged victims and their families, but from a strict legal perspective for Paterno, this is the stuff nightmares are made of. This is why Asset Protection exists, and Paterno may already understand this ever-important principle.