O2 Network Down in East and North London, and surrounding areas
The reason behind the downtime is theft and vandalism at an East London operations site, causing customers in East and North London, Essex and Sussex to lose contact with the outside world. O2 says engineers are working on the issue replacing equipment and that the network should be back up at some point today.
O2 will not be offering compensation to any customers as "the nature of mobile services means that it is not possible for operators to derive which customers may or may not have used their mobiles in an affected area" as well as restating that they spend £1million a day maintaining the network. There's more information on O2's blog post.
Having experienced this myself first hand, it is not pleasant - an iPhone without calls, let alone data is next to useless as far as keeping me updated with the world's events. Let's hope the network is back up soon.