Domain dynamics in the Piezoresponse Force Spectroscopy (PFS) experiment is studied using the combination of local hysteresis loop acquisition with simultaneous domain imaging. The analytical theory for PFS signal from domain of arbitrary cross-section is developed and used for the analysis of experimental data on Pb(Zr,Ti)O3 polycrystalline films. The results suggest formation of oblate domain at early stage of the domain nucleation and growth, consistent with efficient screening of depolarization field within the material. The fine structure of the hysteresis loop is shown to be related to the observed jumps in the domain geometry during domain wall propagation (nanoscale Barkhausen jumps), indicative of strong domain-defect interactions.