I'd like to start off by pointing out that the majority of the d20 licensed products on the market easily fall within these guidelines. We're talking about the far end of the spectrum here.
The d20 System(tm) Guide lists three categories, violence/gore, sexual themes, and prejudice. These apply to both the artwork and text or the product.
Violence & Gore - Most d20 games involve things, like combat and the undead, which can get messy. Gratutiousness is the key here. Fighter Bob can be hacking down orcs left and right, even knocking heads off (check out the cover of Complete Warrior). Fighter Bob shouldn't be shown evicerating the orcs in complete biological detail with organs flying about. Same for the undead: they can be a little bit messy (most of them are decomposing after all), but avoid closeups of their rotting vicera.
Sexual Themes - There are 2 parts to this one.
While sensuality and sexuality may appear in a Covered Product, it must not be the focus nor can it be salacious in nature.
Essentially this means that you can still have chainmail bikinis, but the product can't be focused on them. You're not prohibited from having sexuality in a product, it just cannot be the theme and cannot be salacious. So a discussion of elven sexual customs is ok, so long as a) it's not the whole book and b) it isn't elf erotica.
[for humans and human-like creatures] gratuitous nudity, the depiction of genitalia, bare female nipples, and sexual or bathroom activity is not acceptable
Pretty straight forward, no sex or naked people (or things close to people). The main complaint I'm seeing is about showing nipples. I know that doesn't offend a lot of you, but we have to draw a line somewhere for what is and isn't nudity.
Prejudice - We don't want the d20 System Logo to appear on a product that discriminates against a particular real world group/religion or endorses a particular real world group/religion. This doesn't prevent you from having real groups in a product, but you cannot present one as better/worse than another.
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Andy Smith
OGL/d20 Guy
Wizards of the Coast, Inc.