Dick Costolo, CEO of Twitter, was on stage for an All Things D event yesterday and addressed, among many other topics, the recent controversy over censorship. As we told you last week, Twitter will gray out some tweets that violate laws in a given country. So they might not display neo-Nazi tweets in Germany, where such content is illegal. Twitter said it wouldn’t comply with the much broader laws of China and is content to be banned in that country.

But Costolo said this was all a clarification of existing policy and not new policy.

From the Wall Street Journal:

Mr. Costolo explained that Twitter will only respond to government requests and will leave the tweet up for the rest of the world. In place of the pulled tweet will be a message that the content was removed at the request of the local government.

The company is just trying to handle the situation in “the most honest, transparent and forward-looking way,” he said. “You can’t reside in countries and not operate within the law.”

Costolo also said that he expects the 2012 election will belong to Twitter, that the microblogging system will be the dominant form of discourse, demanding immediate dialogue from campaigns rather than following a news cycle.