It seems like this news has been covered by the media as well. Times and DNA have published columns on this in today's issue. From what i read, it seems like a well intentioned policing which backfired. They intended to block certain blogs but ISPs ended up blocking entire blogger.com.
A good update on the situation is there on Global voices by Neha http://www.globalvoicesonline.org/2006/07/17/india-blocking-access-to-blogs-...
and it is nice to remember the experience of blocking the yahoogroups in the name of militant National Liberation Council (HNLC) of the Khasi tribe started a public list named kynhun in 2003 , and its popularity and visibility went up by leaps and bounds instantaneously, despite it being blocked by all ISPs! a case study is here http://www.thehoot.org/story.asp?storyid=Web210214166221Hoot72410%20PM935&am...
Govt's need to understand that any kind of censorship will not work on internet. The online community will overcome any ban with the help of social technologies. See the wiki page of Bloggers against censorship http://scratchpad.wikia.com/wiki/Bloggers_Against_Censorship
~ Regards Anivar