The Austro-Prussian war lasted from June 15, 1866 to August 23 of the
same year. It is sometimes referred to as the Seven Weeks War, despite
the fact that it lasted more like nine if my math is correct. The war
was fought between Prussia, who allied with Italy and a few small
north German states, and Austria, who allied with several smaller
German states such as Bavaria, Wrttemberg, Saxony, Hanover,
Baden, and the Hesses.
The German Confederation, which included all of the aforementioned
states with the obvious exception of Italy, had captured the formerly
Danish territories Holstein and Schleswig. The administration of these two
states was covered in the Treaty of Gastein, which was signed on August
14, 1865. Austria and Prussia, however, both had different ideas about how
the territories should be governed, and when Austria decided to bring
their dispute before the German diet as well as convening the diet of
Holstein, Otto von Bismarck, then Prussian chancellor, really flew off the
handle. He declared that Austria had nullified the Treaty of Gastein and
he then proceeded to invade Holstein. Austria in turn said that Prussia
had broken the treaty by invading Holstein and took the issue to the
German diet. The German Confederation's diet responded by voting to
mobilize the military against Prussia, whereupon Bismarck declared the
dissolution of the German Confederation. All that was left was to pick
teams.
Austria took most of the German confederation, leaving slim pickings in
the German lands for the Prussians. The Prussians allied themselves with
Italy, who had been wanting to recover Venetia from Austria anyway, and a
few other north German states who thought that it would be a bad idea to
be on the bad side of the most powerful state in north Germany. When the
fighting began, however, there really wasn't any question which side would
win. Prussia was truly a force to be reckoned with, and history books tend
to use words like "crush" and "squash" to describe their victories in this
war. Italy, who apparently only got into wars around this time to get
their ass kicked, lost several battles, both naval and land-based, but it
still didn't faze Prussia. The most decisive battle came at Sadowa (also
known as Koniggratz), in East Bohemia, where the Prussians whipped the
Austrian army quite soundly indeed on July 3.
Bismarck, who probably started this war in order to further his master
plan of unifying all of Germany, did not want to annihilate any potential
allies, though, so he was quick to push for peace. A cease fire was signed
at Nikolsburg on July 26 until a more permanent arrangement could be
signed at Prague on August 23. Austria was made to promise never to mess
with German affairs again, and had to give Venetia back to Italy. Prussia
got to annex Hanover, Hesse, Nassau, Frankfurt, and
Schleswig-Holstein. Additionally, the German confederation was dissolved
and replaced by the North German Confederation, which Prussia
dominated.
After the war, Prussia became the dominant force in the region, a fact
that France did not like one bit. Napoleon III had had his eye on the
German Confederation as a potential conquest, and he had been thwarted by
the dominance of Prussia, so he demanded more territory from Germany in
the form of the Bavarian Palatinate and Rhenish Hesse. Bismarck
refused. Napoleon then demanded Landau and the Saar. Again, Bismarck would
not give in. Napoleon then asked if he could just have Luxembourg and
maybe annex Belgium later, to which Bismarck responded, "Knock yourself
out" Napoleon was satisfied, as was Bismarck, who immediately sold this
information to the remaining South German states in exchange for a secret
military alliance, as was the fashion of the day. So, in a lot of ways,
this war helped a great deal to unify Germany and thus was a
success for Bismarck.
Sources: http://www.bartleby.com/65/au/AustroPr.html,
http://www.cusd.chico.k12.ca.us/~bsilva/projects/2ndreich/a-pwar.htm