In the 1970s a group of Danish free-spirits (we would call them 'hippies') fenced off a section of Copenhagen and called it 'The Free City of Christiania'.
They don't fly the Danish flag, they don't pay taxes, and they don't hurt anybody. Everyone else mostly ignored them. Well, yes, the were dealing drugs on the main street (since renamed 'Pusher Street') but they were soft drugs... marijuana, hashish, herbal concoctions... mostly harmless.
They consume no police manpower because they are among the most peaceable of Copenhagen's denizens. In all this time, Christiania has thus far not risen to the top of the Copenhagen Police Department's priority list. This is partly because the denizens of Christiania do not tolerate hard drugs (heroin, cocaine...) and they do not tolerate photographers on Pusher Street. Take a picture; lose your camera... simple as that.
(Postscript: Pusher Street was closed by the police on 17 MAR 2004. I hope they leave the portal marking the entrance.)
They also seem to have a sense of humor. Note the sign (in English, no less!) that warns you that you are leaving a protected area.
Stroll down Pusher Street. It's lined with booths such as you might find at a flea market. They display slabs of hashish for sale, and they have their prices posted! In the short time we were there, I only got to develop the impression that everyone's prices were about equal (and I have no idea whether they were offering a great deal or taking their customers -- I rather suspect the former).
It's not unusual to see several taxicabs waiting near this portal, and it's not difficult to understand why. After making a 'buy', you wouldn't want to run into the police or other unfriendly people, would you? No, of course not. So you call a cab on your cell phone and ask to be picked up at 19:40 at the corner of Prinsessgade and Pusher Street. You jump into your cab and are whisked away like a celebrity!