A friend of mine is working on some social software, and of course the problem of moderation (some would call it censorship) has come up.
I'm reminded of the classic film 12 Angry Men. There is a great scene where one of the jurors stands up and starts spouting racist rhetoric. Slowly, one by one, ten of the other men turn around, get up, or leave the table. Only one man is left listening. When the racist finishes his speach, the last man stands up and says something to the affect of, "You've had your say, now sit down and don't say another word."
In other words, the community moderated itself. The community chose what to listen to, and what to ignore. I've been in communities where some 'higher power' gets to choose what thread gets locked down, or what individuals can say. I don't go back to them. Even though I'm rarely 'moderated', I just don't like the idea of somebody else being able to delete or change my words.
The problem of moderation is a difficult one, but not unsolvable. I think digg has come up with the best solution. There are no mods, and nobody with ultimate power to delete posts. Rather the community can vote whether or not a comment is valuable. Everybody has one vote, and if your comment gets enough negative votes, it is 'hidden' (not removed) so that nobody can see it unless they specifically click on a link. And you can also see comments that other people have 'dugg', so if you're just scanning an article, and one comment has 50 diggs, you know something insightful, clever, or worthwhile has been said. (It's kind of a rush when your comment gets dugg by a large number of people). I just had one of my comments get over 200 diggs, and it was kind of fun, in an incredibly geeky sort of way. It makes many folks comment with care.
The game industry, that has to manage (babysit?) hundreds of thousands of users, many of them obnoxious teenagers, has also found that self-moderation is the simplest and best way to do things.