Since the second of October 2007 the "ñ" along with tildes or dieresis’ can be part of a Spanish .es domain name.
Red.es, the industry in charge of domain registry in Spain, has informed the 62 accredited registry agents to allow names with the the characters 'á', 'à', 'é', 'è', 'í', 'ï' 'ó', 'ò', 'ú', 'ü', 'ñ', 'ç' y 'l.l'.
This has a tremendous impact on certain names such as the word YEAR for example which until now would have been registered as ANO, which in Spanish should be AÑO.
ANO is literally translated into ANUS, so you can see the importance of this move to permit localised character sets in domains.