Ed Morrissey beat me to the story:
Obama to Chavez: Pound sand

President Obama has kicked the Venezuelan ambassador out of the US in retaliation for the rejection of Obama’s choice of ambassador to Venezuela
…
Alvarez Herrera isn’t in the US at the moment, which means Obama effectively locked him out of the country. Venezuelan officials in Caracas confirmed the revocation on Twitter this morning. That leaves both countries without an official representative in the respective capitals.

Obama essentially called Chavez’ bluff with strictly reciprocal action. Chavez dared him to cut diplomatic ties altogether, but Obama didn’t go that far. Officially, diplomatic ties remain in place and both embassies remain in operation. If Chavez wants to cut diplomatic ties, he’ll have to do it himself.

While Bloomberg News says Alvarez is in Caracas and EuroNews has video report saying Alvarez Herrera is thought to still be in the USA, either way, his visa is revoked.

Mind you, Chavez had announced that he’d reject Palmer back in August,

Chavez had announced in August that he would not accept Palmer’s appointment to be the next US ambassador to Venezuela because of comments Palmer made during his confirmation hearing in the senate.

Palmer said that he believed Venezuela was allowing leftists FARC fighters to find safe haven in the country and that Venezuela’s military was under Cuban influence and suffering from low morale.

This is not the first time Alvarez was sent home by the US. Back in 2008 Alvarez was expelled after Chavez expelled US Ambassador Patrick Duffy. They both were later reinstated in 2009.

UPDATE
Venezuelan blogger Daniel adds some local flavor to the news item.