Under the category of Challenge - the public library board in Topeka, KS, has voted to restrict 4 books on sex based on a challenge from the community:
From the International Herald Tribune
http://www.iht.com/articles/ap/2009/02/20/america/NA-US-Library-Sex-Books.php

Another news story on this event, with responses from the library community:
Library Peers Dismayed at Board's Decision
http://www.cjonline.com/stories/022109/kan_396302566.shtml

And on the Topeka ABC affiliate's web page, a local lawyer says that the ACLU may become involved. Check out the poll at the bottom of the page - it is currently ahead on "Yes, children must be protected from exposure to certain books" http://www.ktka.com/news/2009/feb/20/local_attorney_people_want_legal_action_against_li/

Not sure if this falls into the Challenge or Controversial category, but submitting it here for your consideration - yesterday's edition of The Telegraph has a story about British libraries responding to requests to place religious books on the top shelf:

Bible moved to library top shelf over inequality fears
http://www.telegraph.co.uk/news/newstopics/religion/4687077/Bible-put-on-top-shelf-in-move-to-appease-Muslims.html

[Note that the title of the article is different from the title of the link-hmmm. -th]

New document from the Museums, Libraries and Archives Council in the UK:
Guidance on the Management of Controversial Material in Public Libraries
The link to the full document is on this announcement page:
http://www.resourceshelf.com/2009/02/19/uk-guidance-on-the-management-of-controversial-material-in-public-libraries/

The Chartered Institute of Library and Information Professionals [CILIP] has endorsed the document, and has developed a free training course they will deliver in 6 locations: http://www.cilip.org.uk/training/training/controversialstock_CILIPTrainingDevelopmentMLA.htm

ALA has links on its site pertaining to Challenges:
http://www.ala.org/ala/aboutala/offices/oif/statementspols/statementspolicies.cfm#challenges
and workbooks to develop selection policy, as in this example: http://www.ala.org/ala/aboutala/offices/oif/challengesupport/dealing/ALA_print_layout_1_231032_231032.cfm