This makes me glad that 99 percent of the photos I've posted to this and another motorcycle website have been via uploading the photo to the site. The images weren't anywhere near they quality of the third party hosted ones, but at least they'll still be there. Most of the junk I post is related to some DIY project, so at least someone who wanted to copy it could still get the gist of it.
You're just witnessing good ol' capitalism at work. They provided a service, and didn't calculate into their business plan that consumers might find another use for their service. They maintained the free service by jamming you with advertisments, until that business model no longer provided enough revenue. I'm sure they've known for years that there was a substantial number of customers that were using their site as a third party host, and at some point in the recent past the board sat down and said "hey, we're dying here, we need a revenue stream, let's monetize all these customers that are freeloading on our business...and let's up the pressure to pay by blocking the millions of images that we've previously hosted for them".
If you think this sucks, wait'll they dismantle Net Neutrality, and Comcast/Spectrum/Etc start making you pay based on how many gigs you use every month. "Cuz that's likely to be right around the corner.
"No matter where you go, there you are."