Note that the screenshot at right is from iTunes 9.0.3. Older versions look slightly different. Parental controls are only available in iTunes 5 and later.
To access these settings, select Preferences from the iTunes menu, and then click the Parental tab. Here you've got several options.
First, you can disable access to podcasts, internet radio or the iTunes Store completely. Note that you can keep iTunes U accessible while disabling the rest of the store. Additionally, you can deny access to shared libraries. Once turned off, these items won't appear in the left sidebar of the iTunes window.
Next, a drop-down menu lets you apply the content ratings systems from one of several countries to your own machine. From there, you can apply more fine-grained content restrictions. For example, if you've opted to use the US's ratings system, you can limit access to movies that are rated G, PG, PG-13 or R. Television shows can be limited in the same way (TV-Y, TV-Y7, etc.).
As for apps, there are four ratings, no matter which country's system you've selected: 4+, 9+, 12+ and 17+.
If you want even tighter restriction, select "Restrict explicit content." This won't let users preview, purchase or subscribe to content in the store that's been marked as explicit by the content providers.
Once you're done, click the lock to prevent further changes and provide your machine's administrator password (which your kids don't know, right?).
All of these changes must be set up for each user account that will have limited access. Also, changes made in iTunes on a Mac will apply to a mobile device (iPod touch or iPhone) that's tied to that same limited account. In other words, Jr. won't be able to use the mobile App Store to download apps that the desktop version denies.