I never doubted that NIC.ly was perfectly within their rights to shut down vb.ly. The concern is that they are also perfectly within their rights to shut down -any- other domain as well. Currently, they -say- they only shut this one down because it promoted itself as 'adult friendly'. (Not 'sex friendly', just 'adult friendly', which in the end probably means the same.)

How do we know that they won't suddenly decide that bit.ly is 'adult friendly' also? Or that failing to prevent sex sites is enough for dismissal?

They could change their terms at any time to say anything they want, too. There's no stopping that. Sites like bit.ly are -built- around the domain name. To change it is to destroy the business.

The previous blog posts have been correct in their concerns. It's something that needs to be considered when choosing a domain name.