Looking at the translation it appears there was visible smoke in the cabin. The descent of the aircraft, dumping of fuel and lack of proper communication to passengers must have ignited panic. With passenger phone video becoming more available soon maybe we will get a proper feel for what happened.
Duas aterragens de emergências hoje no Aeroporto das Lajes (atualizado c/vídeo) - Notícias - RTP Açores
There was however also today another emergency alert with fire on board. flight AFR442, A343, Orly to Bogota, said emergency fire alarm in the crew rest area (in 42N0 39W) with emergency landed at Lajes. There was very visible smoke in the cabin when he landed. The cause of the fire has not yet been cleared and may have been treated some kind of slow combustion. A combustion may have started in the luggage room. (Antena1 Azores) News video: Nuno Neves, TV News
The BBC has carried the following with a telephone interview with a very plausible passenger.
Passengers on an Air France plane forced to make an emergency landing have spoken of people ''crying and screaming'' as they feared it would crash.
The AF422 flight from Paris to the Colombian capital, Bogota, made a sudden descent and had to land on the island of Terceira in the Azores on Monday.
Passenger Eden Victoria Erlandsson said there was panic amongst both passengers and cabin crew.
BBC News - 'Crying and screaming' as Air France plane loses height
Air France are in damage limitation mode here with the Lat Am media trying to play down what was a poorly handled incident aft of the flight deck.