Ah serva Italia, di dolore ostello,
The country which gave us two popular foodstuffs (Pizza and Pasta), the Latin Alphabet (used by Romance, Germanic, Celtic, and many other languages), Opera, Ballet, the Renaissance, The Republic (the form of government, not the book), musical notation, the university system (started in Bologna in the Middle Ages), eyeglasses, Humanism, Roman Catholicism, and The Mafia. Despite importing its two major religious influences (the Greek Gods in classical times and Christianity from Israel), Italy has been a major center of theological thought.
Member of the European Union and NATO. Now has the Euro, so Funny Money jokes no longer work. One of the top 10 largest economies in the world by GDP, and easily in the top 20 by any economic measurement, despite corruption, few natural resources, a backwards south, and an archaic political structure.
Much like Germany, Italy for most of its history was pretty much just a geographical expression like "The Balkans" or "Scandinavia". There were many reasons for this, but the largest have to do with geography (it is hard to unite a peninsula divided by so many mountains), the individual wealth and power of many regions making it hard to unify the country by force (Venice or Genoa by themselves were major global players, for instance, and Milan to this day is richer than many countries), and the fact that evey region spoke a different dialect that was hard to understand by Italians living elsewhere in the peninsula. Actually, the so-called "dialects" are not variations of standard Italian, but real languages with their own grammar and pronunciation: the differences between them are so huge that, ironically, an Italian living in Calabria would have an easier time understanding a Spaniard than another Italian living in Piedmont, if both Italians spoke their respective regional language.
All these languages reflect the different local cultures: in fact, every Italian region has its own unique traditions, foods, and history, and it's not rare to notice a bit of rivalry between regions, each one of them claiming to have the best people, or the best dishes. Hollywood Italy tends to portray all Italians as dark haired, olive-skinned folks either living in Rome, Tuscany or Sicily, but real Italy is actually a very, very diverse country with radically different people everywhere you go. This has often lead to stereotypes even between Italians themselves, especially during the '50s and '60s, when many southern Italians emigrated to northern Italy; northern Italians weren't pleased and often looked down on them, labeling them as lazy and poor, while in turn southern Italians considered northern ones stuck-up and boring. Luckily, it got better with time and nowadays these stereotypes are usually played for laughs, as no one really takes them seriously anymore (mostly).
The country was eventually united in the 19th century by the House of Savoy with the aid of patriots like Giuseppe Garibaldi and Count Camillo Benso di Cavour, but it wasn't until the 1920s that the majority of Italians started speaking standard Italian, the biggest contribution being the advent of television in the '50s (this means that only people born before that period can really speak their dialect, which is used mostly at home or in informal contexts anyway; the usage of dialects among younger generations is becoming rarer and rarer, although standard Italian is still influenced by them, and thus varies widely in pronunciation throughout the country. Speaking dialect is considered a quite provincial habit nowadays).
As with Germany, where strong Prussia took the initiative in uniting all the weak states, in Italy it was the Kingdom of Piedmont-Sardinia, ruled by the House of Savoy, that ended up uniting the Italians. The colour of the house of Savoy was blue, which is why Italian sports teams play in blue to this day.
World War I brought a chance for the new country to shine on the world stage, and Italy was persuaded to leave its previous alliance with Germany and Austria and join the Allies in exchange for some territorial gains at Austria's expense.
They got it, but still felt short-changed, ushering in Mussolini's era, which led to the second unpleasantness and another change in government.
Modern Italy manages to be one of the world's leading economies, despite the country having all the political stability of a Banana Republic and an (ex, for now) Prime Minister under investigation for all manner of corruption, white-collar crimes, and rather more interesting crimes. The main Italian car company is Turin-based Fiat, which currently owns Chrysler (marking the second time a European car company owns Chrysler, the first being German Daimler corporation); ENI and ENEL are two major players in Petroleum and Electricity, respectively, and Italy's Unicredit is one of Europe's largest banks. It is no surprise that just about every major Italian company is headquartered in or north of Rome.