What I'm about to say can only be considered a 'best guess' for the most part, considering that I've not played Saint's Row IV.
I am going off the Board Report which describes, in detail, a weapon in the game which implies anal penetration.
It's worth stressing, of course, that no one speculating at this point has played the game. Or at least, not the powerups and weapon in particular which have caused the game to be refused classification.
The language the Classification Guidelines uses prohibits 'actual sexual violence [and] implied sexual violence which is visually depicted, interactive, not justified by context or [is] related to incentives or rewards.'
The description in Board Report paints a picture of a ridiculous weapon (a dildo with nobbly bits circling around it) is used to jam up (fully clothed) pedestrians' rectums in order to fire them up into the air like a firework.
What happened when the media release from the Classification Branch came out yesterday was that the full details weren't made available, leaving people with nothing but the word 'sexual violence' (and its subsequent conditions) to go off.
Consequently, before the details emerged, many people rightly conflated the term 'sexual violence' to mean rape, and online conversation centred around the notion that Saint's Row IV contained a rape scene.
Of course, being the inane, over-the-top and utterly absurd series that it is (IV having you play as a gangsta president battling aliens for heaven's sake), there was little doubt in my mind that the scene in question would be something tawdry, tasteless and puerile, much like the stupid alien probe gun the Board Report describes.
Developer Volition said that the "larger-than-life insanity of the Saints series gets a new twist with a catastrophic alien invasion, and the aliens have transported the Saints to a bizarro-Steelport simulation."
To illustrate why looking at the exact wording of the guidelines and saying 'Yes, this constitutes sexual violence' is wrong can perhaps best be shown by way of contrast.
Below is footage of the Anal Probe gun from Destroy All Humans. In this scene, Crypto the Alien shoots his Anal Probe gun at random pedestrians. When it hits, they arch back grabbing at their backsides, running around with green stuff coming out their ass before they fall over, their heads explode, and Crypto collects some of their 'DNA' as a reward.
If we follow the Saint's Row IV ruling's logic (again, at our best guess based on the Board Report description), the above scene is implying sexual violence, it is visually depicted, interactive, not justified by context (insofar as the context is provided by the player's whims and not given authorial purpose) and is related to incentives or rewards.
The absurd, comical nature of Destroy All Humans puts a clear distinction between it and any notion of real sexual violence, to the extent that no reasonable person would consider it dangerous for minors (and therefore unable to be classified).
A reason why sexual violence is considered so abhorrent is the deeply personal and intimate nature of the horrific crime, and the long-lasting psychological ramifications it creates.
The notion that an alien anal probe gun in a comedy game can adequately represent sexual violence in excess of an R18+ classification is absurd.
This example isn't why sexual violence isn't permitted in games, and to liken Saint's Row style stupid content to the very real crime trivialises the seriousness of a detestable blight on our culture.
(Then there's the drug factor, but if Morphine can be renamed and suddenly become okay in Fallout, and if Plasmids are given a pass in spite of being injectable, addictive and give you 'incentives or rewards', then I fail to see how the 'alien narcotics' in Saint's Row IV can warrant a ban hammer.)