I'm very opposed to censorship. However, I'm not opposed to a company like Amazon self-censoring. If they want to sell erotica, great! If they don't, great! It's up to them to decide what kind of image they want their company to have (e.g. "We don't censor anything!" vs. "We're a family business!")
I agree with others here who believe that the best solution is to have some kind of categorization or rating system like they do for movies. But bear in mind, it's a very subjective concept. For example:
The Clan of the Cave Bear series. I haven't read it myself, but I've skimmed the books, and Oh My! Very explicit.
Lolita. One of the most controversial books of the 20th century, and for good reason. But that very controversy puts it on a number of Important Literature lists.
Huckleberry Finn. No sex, but satire about slavery, with heavy use of the N word.
Stardust. The love scene in that book is surprisingly explicit for a story that is otherwise perfectly suitable for older kids to read.
The Apprentice Adept series, where the characters run around naked half the time.
If I asked which of the above books should go on the "restricted" list, I would probably get as many unique answers as there are people who would answer. You could argue that there should be multiple levels like with the movies rating system (G, PG, PG-13, R, NC-17) but that only complicates it rather than simplifies it.