The game is being banned because beyond all the brutal killing and stuff, there's...nothing. All you do (as far as I've read) is stalk and kill people in pretty brutal ways.

The ESRB's ratings for M and AO are as follows:
M: Titles rated M (Mature) have content that may be suitable for persons ages 17 and older. Titles in this category may contain intense violence, blood and gore, sexual content and/or strong language.

AO: Titles rated AO (Adults Only) have content that should only be played by persons 18 years and older. Titles in this category may include prolonged scenes of intense violence and/or graphic sexual content and nudity.
San Andreas became rated AO after Hot Coffee because of that. Manhunt obviously falls more on the prolonged intense violence side.

If this was coming on the Xbox, wouldn't be that big of a deal. Sure, you still can't sell it at Wal-mart (apparently where the most games are sold in the US), but at least your game can exist. In Nintendo and Sony's case, they don't allow AO games on their systems at all.