Suppose Joe forum owner wants to ban Joe spammer from his website by blocking the IP address. Since most residential connections are dynamic IP, what's stopping Joe spammer from reconnecting and coming back with a new IP address? And what happens when Joe average user is reassigned Joe spammer's old IP? Is Joe average user banned too?

Just wondering...

I don't know about how you would do that, but there are other methods. You could require a signup and email verification (i.e. they sign up with an email, then have to go and activate their account) which might block some bot-type spammers. Maybe require them to also type a keycode made of gifs instead of plain text. By having a signup you would have a master list of those who signed up that you could also blacklist if they became spammers.

Also, like LQ does here, disable posting links until after the 5th post.

Note that I have no idea how to actually implement this stuff. Just seen it done...

I'm not a forum owner or looking to ban anyone myself, just wondering how it works, because I know it's used. I'm pretty sure Wikipedia for one uses it to ban users who abuse the system.

You could ban the entire ISP. That's basically all that you can do. Since as you say your IP changes, there isn't actually a practical way of banning somebody without banning their entire ISP. So you set a ban on 1.2.*.* or something like *.ISP.com

I was banned before on another forum for spaming(goes way back a long time ago).

They dont' bann a single IP. They bann a subnet of IP.

Hope that helps

Perma-banning IS useless. you're better off doing what the previous users said. Disable guest posting. Require email or use captchas. If you don't have moderators then limit spam posting by having the captchas appear after a certain.

Temporarily Banning ips is only good for services that have no other way of preventing spammers or brute forcers, like ssh or http authentication, web crawlers or as icing on the cake. Changing ips is as simple as changing your mac address or rebooting your modem. In fact banning ips carries a small risk. Because of the dynamic nature of ip number assigning, theirs a chance you will affect innocent viewers. That individual you inadvertently blocked out might have been the potential vistor you needed. Someone who might have advertised you, bringing your site from obscurity to internet stardom.
Some enterprising bastard with time and possibly the money(to have multiple isps) might attack your IP banning server with the sole intent of increasing the number of ips in the ban pool until your server blocks the whole internet. Eeeep!

Well okay, maybe thats a bit of a stretch. But you figure 15 minutes is a good maximum ban time. With a 30 second ip ban response time configured and some delayed logins/posting after a certain number of consective spam attempts, you're more than safe. The person would really have to have it in for you to bother after this.