As mentioned, 100% of 2 and 3 letter domain names are taken, but it starts to free up as the number of possibilities expodes, all the way up to 63-character domain names. The most popular registered domain name length is actually 11 characters long, tailing off from there.

11 characters seems weird, until I look at the last three domains I hit:
- livejournal.com
- memestreams.net
- itsyourturn.com

Still seems weird.

Dennis Forbes - Pragmatic Software Development