It's been a few months since Valve announced an "allow everything onto the Steam Store, except for things that we decide are illegal, or straight up trolling" content policy and it's still working out the details. A new blog post provides some insight on how it plans to handle the store once sexual content is again admitted, and what kind of content will be banned.
The post admits its policy is vague and claims that's by design. According to Valve, it's focusing on a small number of people who "aren't actually interested in good faith efforts to make and sell games to you or anyone." As such, the company doesn't pick through their catalog to determine what is or is not a game, instead investigating who they are and how they act in the store before determining to allow their offerings or not.
As far as the games that are (or will be) allowed, the plan is for developers of games with violent or sexual content to write their own description that includes context of how the material appears. Also, there will be new filters to remove games with Mature Content or that are tagged Adults Only from search. Gamers can select up to ten tags (it used to be three) to help avoid particular developers, publishers or creators, and if your search closely matches a title that's caught in the filter, it may suggest the title that was excluded. This applies to games already in the store and in a Q&A section, Valve said moderators would "make sure" games are complying with the new requirements.