I was never a big fan of ImageShack. It remains one of the most popular web services for hotlinking images but it also remains one of the most annoying ones.
They own yfrog. I love the new yfrog. It works as a pretty impressive web client for Twitter with excellent user interface for conversations.
But ImageShack has managed to ruin it with a new policy that blocks hotlinking of images on certain domains.
The hotlinked image ends up showing an error message that the domain is not registered on their platform and it has to be done to enable the embedding.

I have noticed this problem on Trunk.ly (excellent service, you should check it out) and MetroTwit (excellent Twitter client for Windows 7! You should check it out too!).
I have been using Imgur (You should use it as your preferred image sharing service as well) as my preferred image sharing service for a long time now. I am a huge fan of it. I even have a paid account on it and I plan to continue renewing my account on it. The service offers pretty liberal hotlinking policies. The developer is a cool guy who responds to queries and suggestions. ImageShack on the other hand is this Godzilla that is ruining it for both webmasters and web users.