Domain names get put on a big blacklist so that any posts linking to them get [dead]-ed instantly. It's used for outright spam, low content sites (Infoworld, for example), and purging people critical of YC companies (kungfugrippe.com was banned for mocking Scribd). It's totally the wrong solution for the first two problems, and unseemly for the last one.
Users get hellbanned -- every link and comment they post is [dead]-ed instantly, but they see them normally when logged in as themselves. They're also disenfranchised -- they can vote and it's counted but doesn't affect the sums (this happens to normal users randomly too). Great users often get hellbanned over a brief spat concerning a narrow topic — instead of being told not to do that, or given a timeout, their contributions from then on are just blackholed. I occasionally see hellbanned users where paging back through their history reveals nothing worthy of moderation — though there are some cases where I know that the person is being banned simply for having been banned before (like Giles Bowkett's last several accounts).
I make an effort to contact hellbanned users when I see them making substantive comments — make sure there's an address in the public part of your profile! I've sent around 10 such emails and a few github messages, it would be at least twice that if more people had contact info or used googleable usernames.