Isn't this the Fried Liver Attack?
What do you think of that Knight sac?

Black played what wrong? Just because he played that move, doesn't mean that he played it incorrectly. Instead of Nxd5, black could play Na5 or b5 here as well.
Yes, this is the fried liver attack, but black has fine play here. White could play 8.Nc3 which then black responds 8...Ncb4 or if White plays 8.0-0, then black playes 8... Na5 isn't that bad off.
Even though the position looks dire for black, he is actually ok. You have to know the lines of the Two Knight's defense to be prepared for this.
The lolli attack though is good for white as well in the Two Knights.

I don't like the Qf3 line in Two Knights. Black plays Qd5 and the Queens come off, but White still has to deal with his Bishop. all black needs is to find a way to bring the Knight off the edge of the board and he's doing fine.

Its flashy, but its no good. Black is better. You might trip up some patzers or drunks, but if you try playing it in a serious game with time control, white loses.
Rybka's recommendation (computers don't mind playing black here, but psychologically, it may be harder for people to do so):

ok... then Bd7, and the position is rougly equal. White is underdevolped. Black can castle, then move the Rook to c8. Black still has good chances.

2 Knights, fried liver, traxler, loli, mx lange, fritz (no relation to the computer program) variations is what make 1. e4 so much more fun than other 1st moves.
:-)
What do you think of that Knight sac?