Reports are surfacing out of China that the Marketplace has not been fully functional for the past few days.  According to users, WP7 devices are able to able to browse the Marketplace, receive update notifications, and make purchases, but as soon as they attempt to download, they fail with an "connection" error.  It is not certain, but likely culprit is what has come to be known as the Great Firewall of China, a netwok blockade that the Chinese government uses to control the flow of information and prevent its citizens from accessing websites/services that are thought to be unsuitable for one reason or another.  Past censorship has included Google, Twitter, Facebook, news sites and the Android marketplace.

Another possible explanation for the cutoff could be Microsoft themselves, who have not officially released their OS in China and may be denying access to countries that fall outside the Marketplace's current group of 16 supported nations.  WP7 devices have made their way into the country and have gained a loyal following who have found ways of using the Marketplace and downloading content.  It seems, however, that if MS were the source of the outage, they would block all Marketplace activity and not just downloads.  We would also expect to be hearing reports out of other countries where users have manged to get their hands on WP7 devices.

There's no telling whether or not access to the Marketplace will be restored, or who is responsible, but for the time being, it is being reported that download access is still available for those who use a VPN service to mask there source IP address.

We'll keep you posted if we get more info on this.

Source: Penn-Olson, WPSauce