Apple's Steve Jobs doesn't like pornography. Nor do parents' groups and campaigners. The new .xxx web domain, approved last week after a $10m battle, promises benefits to porn buyers and sellers, but does the internet need a red light district?

Everyone at Gerrard Dennis's online swimwear business, run out of a business park in Kent with his wife Jo, is enthusiastic about Apple. The marketing department use Apple computers, senior staff have iPhones. So it came as a shock when Dennis received an email from Apple earlier this year informing him the iPhone app he had spent several thousand pounds developing, advertising his Simply Beach range, had been banned due to sexual connotations.

"We replied saying, 'Are you sure? Have you had a complaint?'" he says, "but in true Apple style, absolutely nothing back. I felt a bit hard done by. To sell bikinis you have to have pictures of women in bikinis, that's what you have to do. We're not talking micro bikinis or anything we're talking about normal bikinis."

Dennis decided to give his grievance an airing on a trade website, from where it was picked up by technology blogs. Five days later his app reappeared in the App store. "I did try sending them an email to say thanks," Dennis says. "But no word from Apple. We're now developing an app for the iPad and we hold no malice. I think my comment was, 'It seems unfair that we're caught up in Apple's puritanic morals but we understand why they're doing it.'"

In the past year, with much-hyped launches of the iPhone and iPad, Apple CEO Steve Jobs has become famed for the stand he has taken against pornography. The company's developer agreement prohibits "materials … that in Apple's reasonable judgment may be found objectionable [eg] materials that may be considered obscene, pornographic or defamatory". Recently the Sun newspaper fell foul of the rules, only managing to launch its iPhone app two weeks ago.

Critics have been quick to point out inconsistencies: since Apple gadgets feature web browsers, banning rude apps doesn't stop anyone accessing pornography on the internet, and while thousands of apps were removed from the App store, Playboy and Sports Illustrated kept theirs (Apple executive Phil Schiller explained that rules apply differently in the case of "a well-known company with previously published material available broadly in a well-accepted format"). Staff at Dazed and Confused magazine nicknamed their iPad app "the Iranian version". But while in the technology world Jobs's anti-porn stand is ridiculed as control-freakery or Google-baiting, outside the media loop his views find vocal support.

Jobs has made it clear that it is the idea of children accessing porn that bothers him, and over recent months and years parents' groups, feminists and anti-pornography campaigners have been making the same point. Pornography, they argue, is ubiquitous as never before. With the click of a mouse, without a credit card, anyone using the internet can access vast numbers of images of people having sex in a variety of ways, many of them unusual and cruel.

What once was taboo, hidden inside a suitcase or wardrobe in an older male relative's "girlie magazines", has moved into all our homes, goes the argument. A new generation growing up on the internet will be routinely exposed to extreme sexual violence before they have so much as removed their shirts in front of a real-life boyfriend or girlfriend.

When the British, Florida-based internet entrepreneur Stuart Lawley won the right last week to start selling registrations to a new domain devoted to pornographic content, .xxx (known as "dot-triple-x"), he was eager to point out that concerned parents were among those who stood to gain. Registration at .xxx is voluntary, and Lawley believes the first amendment guaranteeing free speech means any attempt by US legislators to corral sex sites into .xxx is doomed to fail. But he believes that the premium service offered by .xxx – which at $60 (£40) per registration is much more expensive than other domains – will lead to a "natural migration". Within five to 10 years, he hopes ".xxx will be synonymous with adult online entertainment and will be the first location people look for it", a kind of online equivalent to the top shelf, an internet red-light district.

While this doesn't necessarily mean there will be less pornography in other domains – some sex domain operators insist that it won't, that dotcom will remain the "premium" online property – Lawley's idea is that his compulsory labelling system, tagging sex sites with keywords in the computer code read by browsers and search engines, will mean that explicit sexual content becomes easier to filter or block.

"Many adult webmasters own multiple domains all pointing to the same site, so you might have bigboobs.uk, bigboobs.net and bigboobs.com all pointing to the same underlying website," he explains. "So bigboobs.xxx will point to the same website. The rule we have is that any website that the domain redirects to or lands on has to be labelled, so as a knock-on effect those adult sites that are in .uk or .com are going to be labelled as well."

The history of porn on the internet is almost as old as the internet itself. In the early days people scanned pictures from magazines and sent files to each other via modem. Bulletin board systems created the first opportunity for commercial online porn, and became stores that charged users for access. New e-commerce mechanisms and faster broadband connections led to vast expansion, and porn sites today offer video chats and live webcams, enabling real-time interactions.

Internet consultant Kieren McCarthy, who wrote a book about the battle for the sex.com domain and has worked for Icann, the non-profit body that governs the internet, says that "because they're very focused, and there's a lot of money there, pornographers often do really good advances in technology, so in-stream video, a big chunk of that is thanks to the adult industry".

"Also affiliate linking and making money simply by having links on the internet, that was all the adult industry," says McCarthy. "The step forward to think of doing that, or monetising it as they call it, was a kind of genius."

But technology brought problems too, as amateur pornographers began to put up their own footage, and there were lawsuits over piracy.

Today, between 15% and 23% of all internet searches are pornographic, and in 2008 the FT estimated global revenues from the industry to be about $12bn, though in the US, which controls 40% of the global business, more profits come from DVDs than from the internet.

To those like McCarthy who regard pornography with acceptance mixed with disapproval ("some of it I think is awful, big chunks of it aren't"), a designated x-rated zone on the internet seems like a good idea. Feminist writer Natasha Walter agrees it could be a step in the right direction, and 83% of 240,000 respondents to a CNN poll last weekend supported it.

But not everyone is convinced. The most vociferous objections to .xxx came from rightwing Christian groups in the US, who lobbied the department of commerce and led to Lawley's application being rejected in 2007.

A highly vocal section of the porn industry, organised under the banner of the Free Speech Coalition, was also violently opposed, fearing ghettoisation and objecting to .xxx's fees. Independent adult entertainment creators such as Ms Naughty voiced objections along similar lines ("Already people are demanding that all adult sites be forced on to .xxx domain and blocked"). She also complained about being forced to fork out for pricey .xxx domains in order to protect existing properties. Zoe Margolis, who wrote the sex blog Girl With a One Track Mind under the pen name Abby Lee, shares the fear that .xxx could signal the start of attempts to censor sexual content more widely.

Meanwhile, anti-porn campaigners such as the writer and academic Gail Dines (interviewed in yesterday's G2), think .xxx is a disaster because "the only thing that can happen is that pornography will increase". About this, and nothing else, she is in firm agreement with Stuart Lawley.

Lawley expects to make a lot of money out of .xxx. Currently, there are 7m adult domains and if he sells half a million more, he will have revenues of $30m a year. His company, ICM Registry, has 158,242 pre-reservations, but he hopes to win a 50% market share within a couple of years. Lawley has spent almost $10m of his own money on the project, most of it on lawyers. About pornography itself he claims to be "neutral" and he refuses to comment on the suggestion that exploitation of vulnerable women in the industry is rife.

But he apparently has some scruples about making a fortune out of porn, and has promised to give a substantial chunk of his money away. "For me it was clear this would be a very lucrative business venture," he says, "but at the same time, at the beginning of this process I was the father of a two-year-old son and we put this non-profit element in, that we have this sponsoring organisation [Iffor] to which we donate $10 of every registration every year, that is going to use most of those proceeds to further parental education, and child protection initiatives on a global basis."

Iffor stands for the International Foundation for Online Responsibility and its charter employs the words "responsible" and "responsibility" six times. Whether this is PR, a rich man's guilty conscience, or good business – one of the things he has promised his clients is an enhanced reputation – is debatable. McCarthy, who wrote a report for Lawley about the .xxx consultation, says: "Oddly enough, there are quite a lot of what you would call responsible people in the adult industry, they're putting up porn which a lot of people have a lot of issues with but their philosophy is, it's not illegal, people want this, I'm going to try and be as responsible as possible in providing it".

Those like Dines who oppose the huge increase in the availability of pornography that the internet has brought about, see a more sinister attempt to infiltrate the mainstream – and it is true that Lawley's pitch to the industry, that effective self-regulation is the best way forward, is designed to buy credibility, leading to "more customers spending more money on a repeat basis", in his phrase. Lawley plans to enhance data protection and security and get rid of the viruses and rip-offs for which adult sites are famed. He likens .xxx to a club, a kite mark and a trade association, whose benefits will be so great that belonging to it will become the norm.

Gregory Dumas, an industry veteran who runs an adult portfolio, GEC Media, from Panama, lost his seat on the Free Speech Coalition board as a result of his support for .xxx. He is a robust defender of practices within the sex industry, suggesting critics "need to get their head out of their ass, and you can quote me on that – the women in the adult business, they dominate, they reign over the business, they're who everybody wants to see". But he supports Lawley's effort to tighten up age registration: "I do think the marketplace does need to be cleaner and clearer … If adult sites can be seen to clean up their act then it will benefit the industry."

So far, research on the social impact of internet pornography is inconclusive – partly for the good reason that its effect on a generation of young people growing up now can't be measured yet. Critics express a range of concerns, including addiction and its knock-on effects on relationships; the specific risk to vulnerable young people; and the wider influence of pornography on contemporary culture, as set out by journalist Ariel Levy in her influential book Female Chauvinist Pigs.

Psychologist Terri Apter, of Cambridge University, is more doubtful, arguing that there's no historical correlation between the incidence of sex crimes and pornography. She believes the wider pressures on girls and women to conform to a visual ideal are more corrosive than porn itself, and also that cultural anxiety about pornography serves to displace wider fears about the impact of new technologies on our ways of thinking and relating to each other. "I don't want to be alarmist, the brain is plastic and adapts very rapidly to changing circumstances, but daily life has changed and we haven't yet really managed to think about that."

Feminist philosopher Nina Power agrees that we risk overstating the significance of pornography, and suggests we pay more attention to the economics: "If there's this new domain set up, who makes the money? Where does it go?" She agrees that the pressures on women to shave, slim, seek surgical enhancement, are not down to pornography, and takes issue with what she sees as the overwhelming pessimism of porn's critics: "I have a belief in human nature, that things do change, and people are not doomed to be stuck in these horrible stereotypes."

Sex blogger Margolis says: "I don't think we will 'win' an 'anti-porn' battle and I also don't think that censorship is the answer. The best way to oppose the offensive material is to a) not buy in to it and b) support feminist pornographers like Ms Naughty, who are trying to offer an alternative."

"Will there be a broader backlash against porn?" asks McCarthy. "I doubt it. If a lot of people decide they really want to block pornography then a lot of applications will appear that enable them to do that.

".xxx might be the perfect answer, it might be a partial answer, it might be a complete failure. You don't know until you do it. With the internet you never know quite what will happen."