Apparently, iLunar is the only person in this thread that has successfully read between the lines.
It's NOT that Apple is censoring the app, it's that they are not finished with implementing parental controls FOR the app store. As soon as they are done with that, they can move on.
Currently, Apple IS liable for nearly all of the content that is on the App Store. Because, they provide the channel AND collect revenue (remember 30% goes to them!) from individual app sales. Thus, they can be held liable through varying degrees for the content.
As for those of you that think that it's nonsense and can't happen, don't forget about FEPA!
http://en.wikipedia.org/wiki/Family_Entertainment_Protection_Act
Need evidence that this is the case for Apple's rejection? Re-read the quote silly.
Why would Apple encourage them by citing an instance (the allowing of explicit content on iTunes) that was eventually resolved? Duh. Because, then, like now, they did not have parental controls and/or had finished conducting surveys on whether or not to allow questionable content. Fortunately, that was eventually resolved and we can all now enjoy the vulgarity.