They black out all items that get a DMCA complaint or similar request (so it's still there just not accessible). However they permanently delete illegal stuff.
I would assume they delete illegal stuff as they are compelled to. What I'd like to know is their policy for legal stuff that they exclude that is not as a result of DMCA.
ploetzblog was available and is now completly gone :( "lost" some recipes that he didn't migrate that I used to bake all the time. Used to look it up on the IA and was pissed when it was deleted