Wikipedia, at the moment unblocked, has a list of notable websites and blogs blocked in China here.
Danwei, one of my favorite blogs in China follows the 'Net Nanny Follies' here.
More about 'observation' in China:
In the fist weeks and months of living in Beijing, I somehow felt kind of sort of observed. You hear a lot of things and maybe that's why you suspect a lot of things. Chinese people look at you, because you look different. So you feel watched.
I even felt that someone is looking at the same thing on my computer like I did at the same time. Sometimes I think that someone just uses my email account as it is blocked for a moment. I also felt over listened on the phone. Whenever I was unhappy with my 'ayi' (maid) I told my family back home over the phone and two days later the problem was solved. Or when I was unsatisfied with the service at the Bank of China (once again) I used to yell in my house in hope that someone would listen to me and maybe take action and send some staff for training sessions ....
I talked to people of different embassies in charge for security or defence about how 'paranoid' someone should be about being observed. They all said, you can't be paranoid enough. Did you know that a switched-off mobile phone can be used to over listen you? That is why you have to drop your mobile phones outside certain conference rooms for certain meetings in the embassies.
Even our friendly driver seems to have a second job. To spy on where we go, what we do, what we buy, who we see and what we talk about in the car. My mom uses a hearing-aid in her ear that totally went crazy in our car and we could here another voice talking in Chinese.
We are lucky, we do not have to hide anything (or not much). So, sometimes, I 'used' the invisible ears and eyes to express my dislikes in hope of a change. Or just for fun. - After two years in China, I got used to all this and do not notice it anymore - not as much as in the beginning.
However, the censorship of the Internet is something I really disapprove as I feel handicapped. Handicapped in getting information. Not being able to reading the news I want, the blogs I like or working with my pictures at flickr is making me really upset. I totally understand the young Chinese people that go abroad for studying and then decide to not go back. What a pity and shame for such a great ancient culture.