IRC is a handy tool at all sorts of levels:
For these reasons and more I've come to love irssi+screen. Why do hosting companies love to hate IRC? If it's just DDoS and warez they're worried about, surely those specific activities are already banned and easily detected?
Speaking as a former IRC op.
As productive as IRC can be for the well-mannered person, it's also the sort of place that tends to collect people with poor self-control. Younger people, the disaffected, mentally unbalanced, etc. When angered by some real or imagined slight, these folks tend to love launching DOS or DDOS attacks against the IRC servers and/or those IRC clients whose IP address is visible via a /WHOIS command.
A person determined to be a nuisance to your IRC server will continue being a nuisance for as long as he/she wishes. Many proxy lists are available to the determined nuisance; blocking/banning by IP address thus becomes a constant manual hassle. There's no sure way to automate it; these skript kiddies can and do vary their scripted or manual attacks quite often. Longterm the only way to win is to have a team of people who thus have a longer attention span than the average angry teenager.
An IRC server of any popularity at all is nearly guaranteed one or more such attacks per month; dealing with these attacks requires time, expertise, and tools that many low-cost hosting providers just don't have available and don't see any profit in acquiring.
I stay on IRC a fair amount of the time, via irssi/screen running at Silence Is Defeat (SiD). It costs a buck to signup, and there are no recurring costs. But the quality of service has been going downhill lately; the SiD server is often a tad overloaded and thus can lag a few seconds at times. So you might check out a few other free shell providers. If all you need is an irssi/screen host and the occasional ping/traceroute/nmap, you'll soon find one that works well for you.
rsync your homedir to your local machine every so often though; of course being free, you're not exactly gonna get an ironclad SLA!
IRC is regularly used in command and control systems for various internet worms, malware and spyware. I guess the overhead of determining the valid use of IRC is to high compared to the cost of being black hole routed if their IP block is suspected of hosting a botnet.
They view IRC network(s) as a haven for illegal activity such as software/music piracy, botnets, credit card fraud, etc..
Probably their biggest concern is their liability if a malicious user connects a botnet to their server to lauch attacks from or simply eat up alot of bandwidth.
