In Iran, the Internet is again up against a police state that wants to control all media. After the recent elections there, and the public response to government rigging of the vote, the Internet became very important for the pro-democracy demonstrators. With the Internet, demonstrators could get news out to the world, and each other. While the Iranian government could shut down the mass media (which the government controls most of ), and cell phone service (at least in areas where unrest appears to be forming), the Internet was needed to keep the economy going. So the government used its national level firewall to cut traffic in and out of the country by over 60 percent. Video streaming, email and file transfer traffic was cut 70-80 percent. While this made it difficult for the rebels (mostly young, urban, educated) to communicate with each other, the government's decision to not shut down all Internet use (inside the country, and overseas) meant that the few percent of 23 million Internet users who know how to get around the firewall had to spend a few days sharing that knowledge. This was done, and information kept moving.
Some nations have dared to shut down the Internet completely within their borders. Burma (Myanmar) shut down all Internet access, and all cell phone service, in September, 2007, in the face of urban unrest. This left only those with satellite phones, or their own satellite dish, with Internet access. Myanmar is not as dependent on the Internet as Iran (and most industrializing nations), and the military and police had their own private radio network for communications. There are only about 40,000 Internet users in Myanmar (.1 percent of the population, compared to 35 percent of Iranians).
The hardware and software for building a national firewall is available from suppliers in the West, who supply it mainly to corporate customers (who usually have a legal obligation to monitor their Internet traffic). This software is further modified (as in China, Russia, Iran and other nations) to enable eavesdropping, analysis and selective blocking. For example, the Iranian government can detect who is sending encrypted messages (which is illegal in some countries.) There are other forms of encryption that look like plain text, or a data file, and cannot easily be detected. Bottom line is that the government control of the Internet is more dangerous to rebels inside the country. In a country like Iran, the secret police can quickly get the IP address of users, and pay them an unwelcome visit. Thus while it is possible to always get the word in, and out, of a country with a functioning Internet, it's also easier for the police to track down who is using the Internet. Of course, that small percentage of Internet experts can show everyone else ways to avoid the police. The bottom line is, once the Internet is part of the economy, you cannot block people from using it.
What scares the clerics who run Iran is the new phenomenon of well run police states being quickly overthrown by mass refusal to go along anymore. That's what happened in 1989, and through 1990s. None of these uprisings failed. But Iran, with at least 20 percent of the population still true believers in the "Islamic Republic," and willing to die defending it, the mass uprising could fail, even with all the help it got from Internet access.