I don't use Greyhawk specifically, so it varies per campaign I run.
In the 'Greatwood' game, it's illegal and oppossed both by the civil authorities and the Church. It's not very common at all except in times of war (camp followers providing for the army on the march) or in the worst sections of the two largest cities. In those places, it's not 'organized' in any sense. Gangs control as many girls or boys as they can. The richer gangs may create a 'stable' (a townhouse where the women are affixed to the floor or bed by a long chain); these may serve the middle or even upper classes, depending on the cleanliness.
In the desert campaign, it's the opposite; it's legal and licensed, with enforced cleanliness of establishments to prevent the spread of disease. A house with disease is either cured at the owner's expense, or burned to the ground. It's common in that most towns of greater than 5000 people will have at least one licensed house (usually a frachise from one of the great houses in the largest cities) and two or three 'locals' (kind of like minor league baseball, in fact).
In the largest cities, most of the great houses will be subdivided into more than one section to accomodate all four possible pairings (men looking for women, women looking for men, then both same-sex pairings). Some will have non-humans. Some will have inhumans.
The government controls most of the licensed houses indirectly, though taxation and inspections. Some houses are run directly by government reps, some are run by people that buy a special license from the city council or bribe the governor.
There are some houses of course that are run by criminals or gangs, who do not pay taxes, do not report assaults, etc,
