There are two very interesting threads on the topic of hidden divs. The first one I found this morning at Search Engine Watch Forums named Is Google No Longer Indexing Hidden Divs? but then decided to hold off on posting on it until we received some more confirmation in the thread. Later, WilliamC at article distribution, notified me of a thread he posted at Phil C's forum named Jagger and why so many fell and still dont know why?. Ok here is the scoop, as I understand it.
Google is no longer indexing hidden div tags. Spammers used hidden divs to hide content, but also many non-spammers and even non-SEOs have used them for design purposes. The theory is that the Jagger update now hurt any site using hidden divs. One example site thrown out in Phil's forum was a white hat site at ducor.com that used hidden divs for its menus. If you look at the site's CSS you will notice in the CSS code a line for #elnav {position:absolute; visibility:hidden;}. The member reports that the site "has been all but delisted from Google now.. Right now they show just 4 of our pages in the index.."
My own sites that use a form of this seem not to be hurt, but I do not see any penalty. It may be because the CSS is off the page. Supposedly, if you do not have it on page, then this wont be an issue. Maybe that is why some sites have been affected. Should they be? Most should not. But that is a Google update for you.
So what can you do now? Move that CSS off the page, to an external style sheet. Then maybe, block the robots.txt from those files.
Forum discussion at Web Work Shop Forums and Search Engine Watch Forums.