I am amazed that people are amazed Jack Thompsons and anti-game politicians exist. Where have you guys been? Politicians have been complaining about video games ever since Death Ralley and Custer's Last Stand. They have always complained about the game industry.
And, surprise surprise, twenty years from now they will still be complaining about the games industry and passing 'legislation' about it. The reason why they do this is purely political.
The Game Industry has a choice. It can either put a target on itself for all these politicians to target or they can self-regulate themselves so the politicians go away. Businesses do not win when they go against the government (as government not only has infinite money, it can alter the laws as they see fit).
The reason why Nintendo and Sony are saying there will never be an AO game on their system is not because of "zOMG censorship!" but because anyone who has studied the game industry knows the price these adult only games have. They can literally destroy the console in perception.
You might say, "The market demands an AO game," but, actually, it doesn't. The market becomes quite hostile to these AO games. If AO games were what people really wanted, retailers would stock them and Nintendo and Sony would want them on the console. Retailers (including Wal-Mart) stock other AO material and Nintendo had no problem making love hotels.
The problem is not the ESRB or Nintendo or Sony. The "problem" is ignorance from a European designer (not aware of the long pattern of AO game issues in America and elseware). But also the "problem" is the market itself. Porn sells which is why the Internet is filled with porn. But AO games do not sell which is why you rarely see them.
The market overcomes censorship and even self-regulation. This is why we see the equivalent of soft porn (with foul language) on TV during, what used to be known, as the family hours. Perhaps people ought to be asking about the lack of AO games is simply because the market doesn't want it (who really wants to put down money to play games about homosexuals?). Every time someone says "But its' art!" is almost always when the market doesn't want it (but the developer wants to make it anyway because they believe they are "artists").