You can find a good, reasonably objective summary of "the recent unpleasantness" in this post by catrinella. In brief, LJ's abuse team has been suspending journals and communities based on certain trigger words in their interests lists. In addition to clearly-inappropriate content, the suspended journals include some clearly labeled as fiction, fanfic, and even survivors of child abuse.
LiveJournal's terms of service ban "objectionable" content and say any account can be deleted "for any reason." But the company also claims to "provide users with as much freedom of speech as possible."
"Our decision here was not based on pure legal issues," countered Six Apart's Berkowitz. "It was based on what community we want to build and what we think is appropriate within that community and what's not. We have an awful broad range of discussions and topics and other things going on in LiveJournal, and we encourage other broad-ranging conversations on all sorts of topics. This was a specific case where we felt there was not a reason (for these journals to stay online)."
In other words, they are deliberately targeting fanfic and other material they feel would be offensive to their advertisers and corporate backers, possibly on the word of an external group. It's important to realize that this is merely the most recent in a long string of actions on LJ's and 6A's part that demonstrate that they are simply another soulless corporation interested only in their bottom line. Their site started out as a platform on which one could build a lively, living community. But now you can build your community only up to the point where it attracts the ire of anyone with money or influence. Then you're gone.
This is not surprising, and it represents the fundamental problem with all social websites: you don't control your content, the service does. They will host it only as long as it doesn't interfere with their bottom line.
The only way to control your content is to host it yourself. The only way to build a community that will last is to build strong links among the sites controlled by the community's members.
In my next post I'll make a stab at one way to set about doing this.