The following laws currently (as of 2014) apply to Italian citizenship, but you should check whether these have been amended before making any important decisions.
Any child born to an Italian father or mother is automatically Italian, as is a child born in Italy of unknown or stateless parents, or if the child doesn't obtain the citizenship (cittadinanza) of its parents under the law of their country.
It’s no longer necessary to have to choose between your parents’ nationality and Italian, as Italy now recognises dual nationality (doppi doppia cittadinanza), although anyone with dual citizenship arriving in or leaving Italy must do so with an Italian passport or identity card.
In order to obtain Italian citizenship, you must apply to the Minister of the Interior (Ministro degli Interni) through the Prefecture of the Province of residence, if in Italy or through an Italian consulate abroad. A concession tax must be paid and you must swear loyalty to the republic and that you’ll observe Italy’s constitution and laws.
As with most things involving bureaucrats in Italy, the process of applying for and obtaining Italian citizenship is a long-drawn-out affair often taking years, which will stretch your patience to the limit. The fee for acquiring the citizenship is 200 euros (in 2014).
The required documents vary according to your situation and nationality (it’s allegedly easier for those married to Italians); up to 14 documents may be required, many of which must be on official paper (bollo), translated by an official translator, authenticated or legalised.
A list of the necessary documents is available from your local government office (prefettura), or you can find the information online via the Ministry website. After you've made an application, the authorities have 18 months to make a decision.