Protocol 10 was devised by Hugo Strange and Ra's al Ghul to wipe out the criminal element in Arkham City. Presented to the Gotham City Council as a last resort if the inmates gained access to weapons and were planning a mass breakout, that procedure would grant the TYGER Guards full permission to exterminate the inmates with missile strikes via helicopter.
After he incarcerated Bruce Wayne, Strange announced that Protocol 10 would commence within 10 hours. After he took an encryption chip from a TYGER Guard, Batman was immediately informed of the impending deadline as he progressed through the prison. Upon commencement, goons belonging to the Joker and the Penguin hid in the Sewer and Subway tunnels. Others hid by the walls of the prison.
Batman downloaded the Master Control Code, infiltrated Wonder Tower and shut down Protocol 10.
The only major damage suffered during the attack was suffered by the hideouts of the Joker, the Penguin and Two-Face, while the rest of Arkham City remained intact. It also appeared that the henchmen of Scarecrow were active and killed during the attack.
In Batman: Arkham Knight, it was revealed that many former Arkham City inmates had sued Gotham City Hall for giving Strange the permission to go ahead with Protocol 10 which put all their lives in danger. Those who won their court cases received a large cash payout and were even released from prison. It's possible that supervillains like the Mad Hatter and Deadshot
got their freedom that way (as the GCPD had to let them go although the reasons why were never revealed.)