There’s a lot of reasons why he is popular. I don’t think you can put it down to any specific major cause.
First, Berlusconi originally came to power promising major economic reforms. These were widely popular with Italian businessmen who supported him at first. Italy’s job market is extremely antiquated, unions are extremely powerful and certain professions have an almost guild-like structure. For instance, anti-histamine tablets that you can buy for 60p from Tesco in the UK cost €12 in Italy and require one to see a pharmacist to obtain them — it’s not possible to get such drugs at anywhere other than a pharmacist due to the powerful pharmacy lobby. There’s many examples like this. So originally, Berlusconi was popular for a reason.
Now, how he kept his popularity: he or his family controls a lot of the media. By “a lot” I mean the three main TV channels on Italian TV as well as major newspapers, magazines and so on. He’s the Italian equivalent of Murdoch, but relatively even more powerful.
Further, Italy’s population skews old. The older generations tend to get most of their news from the TV and newspaper, rather than from the Internet. In this respect, for a large percentage of the Italian voting population the only news they get is that coming from Berlusconi’s echo chamber.
Also, Italy is really two countries stuck together to make one: the rich industrial North and the poor agricultural South. Berlusconi has a lot of support in the South of the country as he is quite successful in diverting money away from the North to the South.
The current situation in the Eurozone is also not helping. Italians were always a bit suspicious of the Euro. Now that it has turned out to be a disaster for everybody involved, with Monti being virtually forced upon Italy by the European Union, he can reposition himself as an opponent of the appointed technocracy.
Also, the opposition is split. There’s the established Centre-Left in Bersani, and also the new Cinque Stelle movement by a left wing comedian that is causing upset to the established parties.
Finally, there’s several cultural factors. A lot of Italians are terrified of “communists” (I suppose there’s good reasons for this — look up “Propaganda Due” on Wikipedia). Berlusconi’s established tactic is to write off any court case against him as the work of “communist judges”. Any criticism of him in the press is the work of communists: the British Economist newspaper has an obsession with him (look at their front covers over the last couple of years — he features on them more than the President of the US or the British PM). Naturally, he refers to the magazine as the “Ecommunista”. This tends to go a long way in Italy.
On the cultural front, there’s also the fact that Italians just don’t tend to see politician’s affairs in the same way that they are seen in e.g. the UK or US. Even a tenth of what Berlusconi had done would see a politician resign in the UK. Italians just don’t expect this for the most part.