I usually avoid re-blogging what's been on other popular sites, but this remarkable document is not to be missed (by terrydatiger) – it's worth watching the whole thing, though events unfold gradually. The incident occurred in connection with the eviction of OWS campers at UC Davis.
One of the students sprayed was still coughing up blood 45 min. later (see Bicycle Barricade). It's been speculated that the unnecessary spraying was done in an effort to incite a riot.
UPDATE: Excellent interview with one of the pepper-sprayed students on BoingBoing.
FURTHER UPDATE: Peter Kim has created an excellent graphic showing just how dangerous pepperspray is, here.