Legal and Illegal.
This is an example of how corporations (even extremely accomplished ones) retain their markets (and thereby secure their profits) at any cost whatever. What Microsoft did in China to appease the Chinese government so as to not lose the highly rewarding market there might be morally repulsive to you and me, and indeed to most decent people. But keep in mind that what Microsoft did was legal. I am pretty sure Microsoft mentions somewhere that they reserve the right to remove any blog for any reason whatever and this is a justifiable precaution too. Hence Microsoft did not commit a crime, in the legal sense of the word. Which is all that matters. And apart from a few weak shouts here and there nothing will result, and things will go back to normalcy in no time.
Having said that let me briefly discuss my view of the larger meaning of all this.
I can see some people saying the following: this appalling action of Microsoft was necessitated by an unnecessary intrusion of the government (into the freedom of a blogger to say what he wants) and things will be fine if only governments stop bothering. This is certainly a valid point, but it looks at the issue in a very narrow perspective. From a wider perspective, this is fundamentally not a case of government intrusion resulting in undesirable results, but of businesses doing anything, withing their legal bounds, to maximize their profits. Within their legal bounds - this is very important. It is easy to deal with something that is illegal withing the most basic framework of governance. Another important thing here: if profit-making is the highest moral purpose of a business (as is propounded by Libertarian intellectuals in the mold of Ayn Rand) then what Microsoft has done is not just legal - it is a commendable act. On the other hand, to prevent things like this (and numerous other things that corporations resort to) you need to increase the extent to which a government can act.
I do not want to get into the question of why should governments be given the right to define what is fair and decent. That is not my purpose at all. My purpose is only to indicate how profit-making is the sole goal of businesses and how that induces (in fact, obliges) them to act in ways that jar on some basic human tendencies.