Financially, bitcoins are traceable as every transaction is public and recorded. It will be more difficult to trace back to an individual without some serious international warrants. But it's doable since you can't just buy bitcoins with cash. The purchase has to go through a clearing house using credit card, wire transfer or cheque. Not sure if Western Union is accepted but that might help anonimity.
What I find interesting though is that they allow buyers to trust sellers based on reputation and feedback. It makes it much harder to infiltrate the system. A highjacked\confiscated account with good ratings is probably how law enforcement might try to take this down. But it's difficult because the work that needs to be put in to catch 1 individual will not get you very much. I doubt law enforcement will do very much about it when there are much bigger fish to fry in local cities.