Earlier this week, Pokemon Go debuted a new method of punishing players and accounts who were flagged for cheating. Niantic "blinded" these accounts so that they couldn't see rare Pokemon, presumably in the hopes of crippling the third party tracking systems that used them. While Niantic doesn't typically comment on their anti-cheat campaigns, one of their representatives did make a statement on Reddit to confirm they had recently initiated a new wave of security measures for the game.
The Niantic representative, which was previously confirmed as legitimate, posted the following:
We're committed to maintaining the state of Pokémon GO and our community of Trainers. People who violate the Pokémon GO Terms of Service (including by using third party software and other cheats) may have their gameplay affected and may not be able to see all the Pokémon around them. While we cannot discuss the systems implemented, we can confirm that we are constantly refining new ways to ensure the integrity of the game in order to keep it fun and fair for all Trainers.
So yes, Pidgey Purgatory is real.
This might be one of the more clever forms of punishing cheaters we've ever seen. Instead of outright banning players for gaming the system, Pokemon Go is instead cutting them off at the kneecaps. Since the bulk of the accounts targeted are used to fuel the third party tracking systems that let players see exactly where Pokemon are, it makes sense to disincentivize this behavior by targeting the trackers in a way that doesn't force lawyers to get involved.
Pokemon Go also recently randomized encounters to take away tracking systems' abilities to scan for high IVs (secret stats that separate strong Pokemon from weak Pokemon within the same species) and specific movesets.
Of course, none of these methods really fix the true bane of Pokemon Go: GPS spoofing, but it's nice to see Niantic actively working to improve Pokemon Go so that all players can enjoy the game.