MySpace continues to block services that embed advertising. The latest is Photobucket, which MySpace claims is inserting ads in video slideshows and thus violating the MySpace terms of service. Last month. The FIM site caused some consternation when MySpace uber-friend Tila Tequila was told not to use the Hookah player and music store from Indie911. MySpace execs said at the time that it violates the TOS to embed widgets that sell or advertise without authorization or a partnership with the company. The same goes for embedding ads in slideshows.
—Photobucket alerted its users to the posting problem on its official blog, explaining that new videos and remixes would be removed from MySpace profiles and castigating the company for “contradicting the very belief of personal and social media. ... By severely restricting this freedom, MySpace is showing that it considers you as a commodity which it can treat as it sees fit.” Users were urged to contact MySpace, to ask their friends to do the same and to post comments. The post also mentioned that photos are unaffected. (via GigaOm)
Two things that go unmentioned: advertising and Photobucket’s current evaluation of its sale prospects.
MySpace statement: MySpace tries to spell it out in a just-issued statement that refers to the TOS issue mentioned above: “Photobucket recently began running an ad-sponsored slideshow and encouraged users to post these ads in bulletins and profiles throughout the community. We spoke to the company about their actions, but they refused to respect our community’s terms and we had no choice but to disable their service. MySpace does not block third party embeds or services that abide by our terms of use. We support the freedom of expression and creativity of our community and must continue to protect the experience expected by our users.”

This issue is not going away anytime soon, especially as long as some business models are based on distribution across networks that rely on protecting their turf for their own business model. 
Update: A source familiar with the situation says the bulk of Photobucket is abiding and that the sponsored slideshows are the problem; the videos are being blocked along with all the slideshows because they can’t be separated technologically without Photobucket’s help. MySpace would block only the sponsored slideshows if it could, the source said. That could be a distinction without a difference for MySpace/Photobucket users already up in arms.
Related:
—What Happens When MySpace Turns Out To Be Their Space?