(FORTUNE Magazine) – For Bill Maher, the host of ABC's Politically Incorrect, getting a First Amendment Award at the U.S. Comedy Arts Festival in Aspen, Colo., was bittersweet at best. "I'll treasure this award," Maher said, "but, I'll tell you, life is less bumpy if you're not in line for one."

That's for sure. Maher's late-night talk show hasn't recovered from a flippant remark he made last fall suggesting that Osama Bin Laden's suicide bombers displayed more courage than U.S. Air Force pilots who lobbed bombs on Afghanistan from a safe distance. The White House complained, advertisers fled, and ABC affiliates dropped the show, which will likely be canceled by the end of the year if not sooner.

Maher wasn't the only comedian feeling a chill in Aspen. Freedom of speech was a theme of this winter's festival, a four-day confab of big stars, Seinfeld wannabes, agents, producers, and media moguls. The consensus seemed to be that the pressures on comedy to play it safe are greater than ever. Drew Carey protested in vain when a recent episode of his ABC sitcom was edited because it ridiculed airport-security workers. Tom Smothers, who co-hosted The Smothers Brothers Comedy Hour on CBS until it was abruptly canceled in 1969 for its anti-establishment views, opined that the show wouldn't make prime time today. Even the writers of Comedy Central's freewheeling South Park feel constrained: "Censorship absolutely does exist," said South Park executive producer Matt Stone, "but it's not a government censor. For us in the TV world, it's the Subway sandwiches and Pepsis."

That is nothing to laugh at. Comedians are just about the last people doing overtly political art in an entertainment industry dominated by media giants like Viacom, Disney, News Corp., and AOL Time Warner (parent company of FORTUNE and HBO, the festival sponsor). With big agendas looming in Washington, they don't like to discomfit the powerful. Nor, in in this soft ad market, do they want to alienate sponsors.

In the wake of Sept. 11, some viewers also seem to have lost their sense of humor. In a poll released at the festival by the nonprofit First Amendment Center, four in ten Americans said they favored government restrictions on comedy routines that might make light of tragedies like the World Trade Center attacks or the Oklahoma City bombings. "There seems to be a willingness to give up a few liberties in exchange for fewer hurt feelings," said Ken Paulson, the center's director.

That put the comedians in a delicate spot because, many say, audience expectations are higher after Sept. 11. "People are not content right now to go out and hear that dogs and cats are different," says Judi Brown, who scouts talent for the festival, "They want something that's real."

So how do you tackle reality without being offensive? During a festival performance called Regarding 9/11, Maher let fly with the kinds of barbs that got him in trouble last fall. Poking fun at the White House, Maher joked, "We certainly saw compassionate conservatism in Afghanistan. They dropped bombs and snacks. We don't want to kill anyone on an empty stomach, you know." He got cheers from the crowd.

But when Steve Marmel, a standup who has been hired to host a talk show on cable's TNN, delivered a tirade of anti-Arab jokes ("I'm not saying that all Arabs are terrorists. I'm saying that all terrorists are Arabs"), he was booed and heckled as a racist. Unnerved, he backed off. Don't look for Marmel on The Tonight Show anytime soon.