Hyperlocal news & LoudounExtra.com
In 2007, the Washington Post hired web builder Rob Curley to develop a hyperlocal news website, loudounextra.com. The Post had the idea that local news is a context that works well for people online. A year on and the site itself (despite a terrible URL) is good. But it hasn't gained the traction it had hoped, and the WSJ proudly declared it a flop. Rob posted a frank mea culpa and response as the project lead.
Hyperlocal services and information are definitely taking off. But I'm more of a believer in providing localised services and utilities than localised news online.
Paidcontent.org is a good source for information on similar media projects.