Oh man, The Sims. I remember back in the day when I was 11 or 12 and I used to play the shit out of that game. Even at that age, I wondered what the point of showing the characters fooling around in the bed or in the hot tub was if they were unwilling to go that extra mile. I mean, it's one thing to try and keep a somewhat kid-friendly rating, but if you're putting sexual content like that in there to begin with, it just seems kind of silly to try and pretend to be a saint about it and, at least in The Sims, it just comes across as goofy and awkward.
Then again, I'm vehemently anti-censorship. It strikes me as just...hypocritical to write a nude scene or profanity into a story, then, in hindsight, add in a few bleeps and blurs on the off-chance that a child could be watching. Anyone young enough not to understand what is going on behind the mosaic isn't the target audience and shouldn't have been watching to begin with. Okay, yeah, I agree that it's not okay for an 8 year-old to be commenting to his teacher about how the women in the commercial for Spring Break Boobie Bonanza must be cold since they never wear shirts, but where the hell were his overly concerned parents when he was watching Comedy Central at 4 AM in the first place?
As for ogling player avatars and such, I can see how some people would find it weird if they thought of the character as an extension of themselves, but not everyone sees it that way. If I'm given the choice of playing a male or female character in a game, I tend to go with female. I get asked whether I'm gay or wish I'd been born a girl all the time, but I'm not and I don't. Part of the reason I go with girls is because the ladies are typically faster in fighting games and sometimes the reason is simply because the option was presented to me. However, when it comes to MMOs or other games where I'm likely to be staring at the same character for 100+ hours, the reason is simply because I'd rather spend that time looking at a girl than a guy.
Incidentally, the first time I ever saw pornography, it was because I mistyped the URL for a website dedicated to (non-nude) custom skins for The Sims.