JD Rucker aka 0boy has uncovered the story and Mashable confirmed it: Digg's URL shortener 'diggbar' - which shortened web addresses and put a digg iframe on top of their pages - is now redirecting visitors to the digg.com site instead of the destination URL that was initially shortened, once the story is posted as a digg submission that can be voted on.
This isn't exactly the end of the world, but it wasn't previously like this for users. It's being used by a bunch of 3rd party twitter clients & sites as a regular utility URL shortener- not just a digg traffic engine. The appearance is that digg got people using their shortener for its own sake, and then changed how it functions to better benefit them after the fact. In a word: Sneaky.
The bottom line is the only reason to use Digg.com to shorten a link is if you're submitting the story to digg.com and want it to be voted on. Period. If you need a vanilla URL shortner, Digg (or any social network, really) probably isn't the one that you want to use.
Going forward, I'm using Bit.ly almost exclusively. I'm doing this mainly because it's not the domain of a social network's service, and because it doesn't have a toolbar that wraps the page in a frame we all know annoys at least 50% of the people who click thru. Bit.ly, as far as can be told, just wants the analytics and metadata (and shares most of it -for now, anyway- which is sweet)
You don't even need an account to shorten a link with bit.ly, but if you sign up for one, it saves all your URLs on public page like bookmarks but with the aforementioned yummy click and conversation data.
Any bit.ly link then shared on twitter or elsewhere can be looked into further by placing /info/ in between the bit.ly/ and /xxxx hashstring portion of characters in the URL (e.g. http://bit.ly/info/1RPfXx)
Back on their site, They've got a search that's a nice way to look at what links are being shared across twitter. You can use a twitter username as a search operator along with words like " listening to: " (or 'reading,' 'must read' etc.) You can subscribe to your recent bit.ly 'bits' as an RSS feed too.
It's like I've been saying to friends, bit.ly is the new del.icio.us
Update: Here's a screen grab I took that shows off the bitly sidebar for sharing your links:
If you want to try this service out, go to a web page you'd like to shorten the URL for (this one even, ;), and in the address bar of your browser, type ' bit.ly/ ' before the ' http:// ' and hit return. The link's right there for you to copy and paste and much more.
(I have no material interest, financial -or -otherwise in Bit.Ly I just think the service is good. This stunt by digg makes all URL shortners look bad. I don't think bit.ly and some other's are.)