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check out http://mem.com. They made something for a friend's relative recently (unfortunately) and it looked quite nice.

I don't mean to be rude, but how is a service like this actually used? I mean, in your experience, what's different about it versus, say, a blog, or even a simple cms like jottit?

Here's how it was done: http://jeffreyfalstrom.com/

When someone close to you passes away, you are distraught and have a lot of things to take care of. Maybe you don't want to register a domain and do design and stuff (most people aren't designers afterall). So they set you up with a nice memorial and take care of the details in a tasteful way. Think of it as a specialized CMS.

Check the last bunch of techcrunch 50s. I think there was something along these lines, but I can't remember what it was called.

A quick google search turns up a glut of these services...are you looking for something different?

The available ones are pretty horrible.