The full details can be found at the above link, but in essence they say:
So basically each user can now flag individual entries, or indeed their entire journal, to indicate:
If you wish to flag your entire journal or one of your communities with either 'Adult Concepts' or 'Explicit Adult Content' then you need to go to viewing options.
I haven't read the full thread of more than 2,000 comments, but the biggest issue that seems to keep coming up is other people flagging your entries and how that is open to abuse, e.g. 'you hated my story so I'm going to flag all your entries with explicit adult content', etc. etc. and how LJ is going to handle that. As yet there hasn't been an answer to probably the biggest question 'And the appeals process for a user who feels their material has been flagged inappropriately or maliciously is...?'. e this thread
Ah, further down this thread, marta (the person whom has joined the LJ team to answer questions on this new tool) says: False flagging can result in the user's "flags" no longer being counted towards the threshold for review.
Out of interest, are people on my flist planning on using this tool for themselves? Are you going to make an overall setting for your journal any communities for either of the levels?