First things first: Oblivion has the content of a T-rated game. It's change to M-rating was very controversial and I will discuss that later.
1. Storyline: Set in the Imperial Province of Cyrodiil, one of many nations in Tamriel, Oblivion opens (as do all Elder Scrolls games) with the player in a cell for reasons unknown. The emperor (voiced by Patrick Stewart), during an escape, enters the cell and leaves through a hidden passage with his bodyguards, and the player follows. The emperor, after being slain by cultist assassins, gives the player the Amulet of Kings, and the orders to "close shut the jaws of Oblivion" (Oblivion being the realm of the Daedra, or demon princes.) The player learns that the cultists belonged to the Mythic Dawn, a group who worship the Daedric Prince Mehrunes Dagon, lord of destruction. One thing leads to another, and the players are swept up into a quest to stop Mehrunes from entering Tamriel and destroying it. Other arcs from the DLC include gathering the relics of the Divines and becoming a Knight of the Nine in order to slay the Sorcerer-King Umaril the Unfeathered (young adventurers may get a kick out of being called "Sir Knight" during this questline and after it), which can be found in the Knights of the Nine DLC, and stopping the apocalyptic Greymarch for the Daedric Prince of Madness (and amusing dialogue, judging by your conversations with him), in the Shivering Isles DLC (some creatures found in the Isles, like Flesh Atronachs and the Gatekeeper, may prove disturbing for younger players).
2. Violence: Bandits, Daedra (demons), Zombies, and more must be fought with steel and spells. Players don armor, wield any of three types of weapons (Bladed weapons, consisting of Shortswords, Longswords, and Claymores, Blunted weapons, consisting of Maces and Axes, or Marksman weapons, consisting of Bows and Arrows), and choose between spells from one of various magical schools (Destruction magic being lightning, fire, and ice spells, Conjuration allowing them to summon minions to aid them, Restoration, to heal themselves and allies, and Mysticism to, well, not sure what that does yet). Small amounts of blood will spray when you strike an enemy with a weapon, leaving a cartoony blood stain on the floor (which elongates if they fall too far to the side while dying). Blood will also coat the player's blade further, the more blows they land (these go away after a while). Magic will result in cartoonish effects (lightning will cause the player's target to crackle with electricity for a time, fire will wreath them in flames, etc). A bloodied corpse can be seen hanging upside down in one area of a room if your torch is drawn, with it's rib cage and leg bone visible.
3. Sexy Stuff: Nothing much I've seen so far, save for being able to strip a dead opponent of their armor, leaving them in their underwear.
4. Drinking, Drugs, Smoking: Some alcoholic beverages are available, and can be consumed for temporary benefits and negative longer-term effects. Skooma is also referenced, and is implied to be a hallucinogenic, addictive drug. Players will run across at least one Skooma addict in Shivering Isles (in the first area of New Sheo you enter).
5. Language: Some light use of D--n and Bast--ds.
6. Religious Concerns: The Nine Divines are basically gods (although they are technically merely a powerful race called Aedra, they are viewed as deities by the people of Tamriel). Each one has a sphere of influence, similar to the systems of the Greek and Roman mythological gods: Zenithar is the god of Commerce, Stendarr, the god of Mercy, Mara, the goddess of Love, etc. Talos was a mortal named Tiber Septim before becoming an Aedra, and now is the god of War and Justice. These could cause some issues with more religious-minded families.
7. Notes: The game is basically T-rated, as mentioned earlier. However, with the ability to make "mods" (modifications to the games code) to the game, a gamer was able to create a mod that turned all of the women in Oblivion topless. Many other modders followed suit. THESE MODIFICATIONS ARE ENTIRELY OPTIONAL. You must know how to access and install them first, which is most likely out of the question for most players, as Steam does not offer easy to access mod support for this title. The M-rating was received on this premise alone, not on the game's own merits.