A little bit of research and I came across a page on Jon Hughes' blog, "Notes from Phazm" that provides some evidence as to what is going on with the Alexa redirect function.

For those who haven't heard yet, the Alexa redirect now produces a 404 error.

For those who aren't familiar with this subject at all, allow me to explain. The Alexa redirect was a technique used by many to theoretically increase the Alexa rank of their sites. You would slap "http://redirect.alexa.com/redirect?" in front of any link to your site, and it was believed that would send all link clickers through Alexa to be counted before proceeding to your site. So basically, the redirect was a trick used to make up for visitors who don't have the Alexa toolbar installed.

However, it turns out Alexa never officially admitted the redirect would do any such thing. In fact, there was apparently no official notice along the lines of, "Now you can use our redirect function." But somehow the technique became a fairly well-known practice on the web. Some people are adamant that it served no purpose, while others claim to have noticed a definite benefit to their ranks from using it.

For whatever reason, Alexa has removed the redirect link functionality. Jon Hughes actually went to the trouble of asking them why, and this is the response he got:

"Dear Jon,
Thank you for your message.
We no longer provide support for the redirect function.

Best regards,
Alexa Internet Customer Service"

How fitting that Alexa sent out a legitimate "Dear Jon" letter to let all us bloggers know it's breaking up with us! (At least as far as the redirect is concerned.)