I'm not laughing at the fact they approved this particular app. I'd probably sell it in my hypothetical independent app store (if it was actually good, and if I thought it would sell), and I've never smoked a thing in my life.
What I'm laughing at is this part at the bottom where Steve Jobs tries to make a moral stand about not wanting porn in his app store. Despite that Apple allowed all kinds of awful, degrading porn apps for years before throwing down the banhammer. And that it still allows Playboy and SI apps. Also, the iPhone still has a web browser, and last I checked the web browser was the greatest porn app of all time (of all time! — sorry, I'm pretty sure that's not funny anymore).
If Apple had made the right decision and not involved itself in every app sale it wouldn't have to worry about any of this. Steve Jobs wouldn't have to go and proclaim his moral superiority on something he pretty clearly doesn't care about. He could instead go on about things he does care about, like user interface design. Have you heard the one about how he didn't put arrow keys on the original Mac keyboard, to force programmers to create new interfaces around the mouse? Now that was taking a stand! This is just silly grandstanding.