"No nudity" is a lot more strict than just "no porn". Does that mean that, for example, you could not make a Flickr app that lets you slideshow your photostream on your TV because Flickr allows artistic nudity? Or could you, but you'd have to restrict it to only show photos that are marked as 'Safe' in the safety filter? What about similar sites that don't have multiple content safety categories?
I'm pretty sure it means, "Don't do anything that Google worries might get them bad press in the US."
If you'd like to know the details of that, just ask! Just ask your nearest lamppost, garbage can, or alley cat. They're much easier to reach than developer support at Google, and they're almost as likely to give you a useful answer.
Anecdotally, during last year's annual Christmas Monopoly game, my mother-in-law (who was out the game early) flashed us a YouTube movie of a lady getting her privates waxed, asking what the f was up with YouTube for allowing this.
I must say it quite surprised me this type of content was allowed/condoned.
