My prediction is that in niches where the ratio of information value to entertainment value is high, blogs will prove to be superior mechanisms for disseminating news. For example, local politics tends to have lower entertainment value than national politics. To me, that implies that at some point we will start to see elections for school board or city council influenced more by coverage in blogs than by coverage in newspapers.
Here is his description of how the blogosphere works (should work?):
This filtering process makes all of us more efficient. Information with low value does not travel far. Information with high general value tends to travel the farthest. Information with low general value but high local value tends to reach interested people but then die out because as it gets passed along its value decays below the threshold. Everyone tends to receive information with a high value to them, and they avoid having to read information that has low value to them. If the filtering system works well, I get to read lots of economic insights, and I never have to read anything about, say, Olympic figure skating.
Here is my earlier post on how blogs influence the world.