Microsoft and Yahoo have both signed an agreement with the Chinese Government, which pushes a desire for the two companies to record the identities of bloggers and censored content. Eighteen other web companies have signed this agreement as well.
The Internet Society of China, which is an arm of the Information Industry Ministry, is encouraging Microsoft and Yahoo to retain the identity of bloggers, though it is not required. Proposed as a safety measure for Internet users, the pact is stepping up censorship regulations across the board. What started out as a way of monitoring and controlling web hosting services is fast spreading to blogs (services like LiveJournal and many more have already been banned in the past).
The journalists' rights organization Reporters Without Borders is very much against this pact, though what Microsoft and Yahoo agreed to was less damning than the original pact that was put forth by The Internet Society of China, which required names and content to be recorded. That being said, it's reported that Microsoft does not plan on asking bloggers to reveal their true identity, reportedly saying that the pact does have some implications that it doesn't support.
While Microsoft and Yahoo are walking the fine line of doing business in China, Google is seemingly taking tentative moves towards launching a blog search in China as well.