Yesterday, Hitwise released a report about what happens when your site gets banned from Google's index. Using charts and graphs, Hitwise illustrates how the market share of searches declined due to the company's blacklisting, and how the competition moved up.
Are you surprised? I'm not. But this is a true illustration of what can (and does) happen when your site, which ranked #1, goes down and another site takes over. The search traffic gradually goes in their favor.
The specific instance shows another thing: Google is after your paid links. It appears that that is what caused the domain to be removed from the index to begin with.
Forum discussion continues at Sphinn.