Steve Jobs has every right to define and try to control the fate of his company's brand. As others have pointed out, porn could rapidly become very popular on the iPhone OS platform if allowed into the app store. Apple has never tried to control access to porn on macs. I doubt that they care who uses porn or whatever on their macs (or iPhones outside of the context of the app store). Nobody tracks the fact that people are using their macs to view porn. However, the popularity and availability of highly popular porn apps would be there for all the world to see. This on highly portable devices that Apple wants to be family and school friendly. Porn on the Android platform is not strongly linked to a single company. Porn on an iPhone OS-based device would be linked to Apple. Imagine the outcry from assorted groups and some media outlets as the porn keeps pushing the envelope. Apple will never risk their brand's reputation to satisfy some notion of a right to freedom.
This is not about freedom in the absolute sense. It's about choice. Apple presents one choice. It's not the only choice.
I think a lot of people are confusing politics and consumerism here. Steve Jobs isn't trying to run the United States, he's trying to produce a product that he and his team thinks works well, and he's sticking to his guns. I really respect that about him. I think that's one of the reasons Apple is so popular and he is such a popular and successful CEO.