Is internet censorship the future?

The Register reports latest developments in the Australian Government's ambitions to censor all internet traffic.  Originating as some misguided initiative to "protect the children" (whatever happened to parental responsibility?), it now appears that Australian internet users are likely to face a situation where they must choose from one of two censored streams.  Opting out of the "child-friendly" stream (which blocks a wide range of supposedly harmful content), merely subjects the user to an adult filter that blocks material deemed by the government to be inappropriate for adults.

Is this patronising and paternalistic system the future of the internet?  Or has it the potential to lead to unreasonable censorship?

On whether the proposed system is practical, the UK internet filtering company Censornet is quoted as follows:

However, the firm foresees two issues with any solution. Most filters tackle just the HTTP protocol. But HTTP accounts for an average of 25 per cent of a user's bandwidth, with the rest taken up by other traffic, including email, peer-to-peer and instant messaging. 

Here in the UK, we are subjected to some level of internet filtering.  Wikipedia has an interesting overview of the status of several countries' internet filering policies:

United Kingdom is in ONI's watchlist and is not on RSF's internet enemy list. British Telecommunications ISP passes internet traffic through a service called Cleanfeed which uses data provided by the Internet Watch Foundation to identify pages believed to contain indecent photographs of children. When such a page is found, the system creates a 'URL not found page' error rather than deliver the actual page or a warning page. Other ISPs use different systems such as WebMinder.

But who decides which URLs end up on the filter lists?  Are the public entitled to know?   Where the filter lists are maintained by government agencies, how can we be sure the blocked sites are appropriate?