This resulted in a spectacular public relations disaster for Amazon, a new term on Twitter (#amazonfail) and the notice of the mainstream media.

Amazon now claims that this is due to some sort of internal error. Variously, they've described it as a cataloging error or a "glitch."

I am not surprised by this explanation, honestly. It's their public line that it was a mistake, and they've got to stick to it or admit just how dumb they were. The evidence is far more than a bit suspicious, however. As far as I can tell, every affected title -- from Ellen Degeneres' biography to Brokeback Mountain to the children's book Heather Has Two Mommies -- were listed under the categories of of homosexuality or gay/lesbian on Amazon. In other words, the cataloging error affected one specific group of folks -- one that's in the crosshairs of agenda-driven wingnuts.

I would note that there's not much that Two Mommies has to do with Brokeback Mountain, except for the fact that both books have Teh Gayz in them and are listed under the same tags on Amazon.
Out of curiosity, I checked a few other books I know to have GLBTQ themes, but aren't likely to be under the gay/lesbian tag, on Amazon. They included:
Tanya Huff's Blood Ties books -- the hero's a bisexual vampire. (As an aside, I'd take Henry over Edward any day.) It's not listed under a gay/lesbian tag, and the sales rank is just fine. 
Lois Bujold's Ethan of Athos -- about a man from an all-male planet who's left his world in a quest for ovarian tissue. (For real. And it's a dang funny, well-written book.) Yup, it's ranked and it doesn't have a gay/lesbian tag.

And finally, Mercedes Lackey's Last Herald Mage series -- about a gay guy, his boyfriend, and his magical horse. Again, it's not listed under gay/lesbian and it's ranked just fine. And this series tends to be one that the conservatives really target; Misty is openly critical of certain flavors of crazy and this series, and the author, push their buttons in many ways.
However, not one of these examples is particularly adult. These books are fantasy/SF novels, rather well known ones, and they were not written to be erotica. I thought perhaps Two Mommies and a few of the others being deranked was a fluke and perhaps the rest of the books were (arguably) adult-ish in nature.

So, to further check my theory, I pulled up Laurell K. Hamilton's outright pornographic vampire-x-werewolf series about Anita Blake on Amazon. And it's ranked too. No problem with the listing there. It's very definitely adult -- dear readers, I have spent significantly more than half my life around SF fandom, I knew what slash was before I was old enough to legally vote, and Hamilton can make me blush. And there's no problem with its sales rank. But it's not identified with a gay/lesbian tag on Amazon.

For giggles, I also checked what I consider to be one of the worst books ever published by a mainstream publisher, which is the pedophilia-positive Firefly by Piers Anthony. This stinker made me swear off Piers Anthony forever. Not only is it gratuitously explicit, some of the explicit scenes include erotica between prepubescent children and adults. Guess what? No GLBTQ related tag. And it has a sales rank.
I think I see a trend here.
Here's my suspicion, though I can't prove it: Someone at Amazon decided that anything in a gay/lesbian or homosexual category on the site was automatically "adult" and should be removed from easy public view. Unless you searched by author name or ISBN, or were otherwise performing a search specifically targeted to that book, you wouldn't see it. You'd have to be looking for the book, you couldn't just stumble over it. The site wouldn't suggest it to readers when they searched for something else, and it wouldn't be easy to find via keywords.
If this was a decision by Amazon's higher ups, and not the action of a rogue employee, I can sort've see their logic. For about two seconds. If I squint hard enough, shove my glasses up my nose, and try to think like a marketing rep.
The logic probably could go something like this: Jane Doe Conservative is looking for a book for her kid. She types in, say, "Dr. Seuss," and when Dr. Seuss pops up the site suggests a few other titles. Jane Doe Conservative clicks on one of the other titles, which leads to a few other suggestions, and a few other suggestions, and ...
And Jane Doe Conservative, after she gets out of the hospital from her coronary, launches a nasty protest against Amazon. And Amazon then has to deal with the wrath of Teh Crazy Right Wingnuts.

But the thing is ... there's nothing wrong with the books that are listed in gay categories in and of themselves. The category is somewhat unevenly applied, but is simply used to describe books which have substantial content relating to homosexuality. This doesn't mean they're adult in nature. And even the books which are adult have their fans, and as long as there's an accurate description of the content, that should be all that's needed. Yes, certain groups might find the existence of a romance novel featuring two Fabio clones in a clench on the cover worthy of sputtering outrage, but I can't think of many books that aren't offensive to someone, somewhere. If there's an correct and clear description of the book, the people who are offended by such topics can simply chose not to buy them. Problem solved.

One thing I'm wondering about is if someone at Amazon who wasn't familiar with the genre (note that, besides books, Amazon sells everything from groceries to mousetraps) may have just assumed everything tagged gay/lesbian or homosexual was adult in nature, with explicit descriptions of sex acts between same-sex partners. That would be a bad and wrongheaded assumption, but it's possible. And then they just decided to derank the whole category, without double checking what was in the category.

However, even if they get it straightened out, fix the listings for the majority of the books, and only de-rank truly "adult" material in the future, there's one basic question I have here, and that is, are they trying to derank adult material? And if so, who determines what's adult? And should it be deranked?

I can flat guarantee what I consider to be adult is not the same as Jane Doe Wingnut from the Bible Belt of middle America. I've spent more than half my life involved in SF fandom, cheerfully consume my share of professional and amateur writing including an occasional bit of erotica, and it takes a fair bit (Piers Anthony ...) to shock me, or even surprise me. I've even beta read for a few authors known for writing gay characters. I would be annoyed if Amazon chose not to list related titles just because they contained "adult" content. I might want to read them!

On the other hand, Jane Doe Wingnut might find your average Harlequin novel (or a relatively inoffensive gay romance equivalent) to be shocking, immoral, and worthy of burning, possibly with the author on a spit above it.

So, hypothetically, if they wanted to derank adult material ... who gets to decide what's adult? And what criteria are they going to use? Will they be subjective or objective?

If they decide to be objective, how do they do that?

Are they going to count sex acts per book? And if so, would they divide the number of words by the number of sex acts per book, to determine the ratio of sex to plot?

Would a furry comic with sexy gay foxes and cat people be more or less adult than yaoi manga?

Is two guys kissing more adult than a pretty girl kissing a handsome man? What if there's tongue and groping?

What sex acts are more adult than others?

Do you ban books for mention of underage sex? If so, what about Romeo and Juliet, where the kids not just did the wild thing, they killed themselves afterwards?

If it's a graphic novel, or a movie, what counts as adult? Does a quick flash of titties rank as more or less adult than a minute-long view of someone's posterior? What if said posterior is unattractive? Does a cute butt count towards a formula for declaring a title "adult" where someone's hairy, pimply nether cheeks wouldn't? Or vice versa? Are guy butts more or less adult than girl butts?

Is a movie featuring repeated displays of full-frontal male nudity too adult to be ranked? What if the movie's a blockbuster hit, and the wang in question is big, blue and on display in triplicate?

Figuring out what's adult and what isn't is entirely subjective, very difficult, and not a job I personally would want. Banning entire categories from the ranks, however, is not the way to do it ... and if Amazon really did try to do it this way, they deserve every bit of the mockery and all the targeted outrage they're receiving.

ETA> Dearauthor has a detailed analysis of which tags were deranked here.