It is not safe to enter your master password on a random website like password.ly. The risk is simply too high that it gets hacked someday and your master password will fall.

That it is not stored in a database is only a small advantage. If whoever controls password.ly wants to have all passwords, she could do so whenever she wants, a matter of a simple extra request. It could even be hidden in the params of any link on password.ly (to prevent you from noticing the extra request).

And that reveals the second big problem with this: The master password is basically every password. If it falls in the wrong hands you are worse off than you would be if you have a small set of passwords, which isn't a highly recommended strategy in itself.

But the idea itself isn't too bad, if you would instead of using password.ly use a terminal bcrypt command to bcrypt your password+sitename it would be very decent indeed.

The only way sites like this could be safe to use is if there would be a code-signing standard for the web.

edit: This service actually sends your password to their service! At first I thought it was an innocuous enough javascript password generator, but this is so stupid it borders on malice..