The one-page link shortening service provider, vb.ly, has been seized with no apparent warning by the Libyan government which manages the ".ly" county code Top-Level Domain (ccTLD). According to reports, Nic.ly, the registry operator of the ccTLD in Libya informed the user of the domain that the content of its website was considered offensive, obscene and illegal by the Libyan Islamic Sharia Law and therefore revoked (source).
Updates: UPDATED Oct 08, 2010 11:02 AM PDT
Libyan's official statement regarding the decision to block vb.ly Oct.8.2010
Related topics: DNS, Domain Names, Registry Services, Internet Governance, Law, Policy & Regulation, Top-Level Domains, Web
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It shouldn't be any surprise that Country Code TLD operators have to follow the laws of their country, no matter how those laws may appear to others.
They have policies and they have taken every effort to be fair, in the context of those policies, from what I read there.