MacRumors.com

We reported back in May that Apple might loosen the App Store content restrictions once the iPhone 3.0 software became available. iPhone 3.0 offers parental controls which allows you to set what level of content is permissible in your iPhone's Movies, TV Shows, Music and Apps.

Macenstein playfully reports "And then there was porn" pointing out Hottest Girls ($1.99) as the first iPhone App to have nudity.

“We uploaded nude topless pics today. This is the first app to have nudity,” writes Hottest Girls’ developer Allen Leung.

The App does carry a 17+ Rating for "Frequent/Intense Sexual Content or Nudity" and "Frequent/Intense Mature/Suggestive Themes".

Parental restrictions can be turned on in Settings -> General -> Restrictions in your iPhone. If an App falls outside of the allowed rating they will simply disappear off your home screen. Once you turn the restrictions off again, the affected apps reappear. This system would have avoided the issue with NiN's app rejection in May. NiN's app was eventually accepted.

Update: Hottest Girls is currently unavailable for purchase. According to an announcement posted on the developer's site, the application has temporarily been pulled due to its popularity placing strain on the image server. The developer promises that the app will return shortly with the adult content continuing to be included.