My first reaction, like so many here, was to rail against PayPal's supposed "censorship".
But having read a little more about the specific things they objected to, I'm not so sure. They aren't setting the bar very high here - the stuff IS pretty disgusting. And as for Why they are doing this, maybe it's because they have Principles and Taste. Maybe they're doing us all a favour.
Perhaps PP should be Thanked for exerting some kind of last-ditch control in a laissez-faire, overly-permissive system where common sense and decency are sadly optional, and good taste is in a death-spiral with no floor!
Let's not be theoretical about this people. In the real world some stuff really is unacceptable! And absent any other adult in the room, PP is performing a function that really shouldn't be necessary in a civilized society.
PP is taking a stand, facing up to their critics, and risking losing business. Sounds like a highly principled company to me!