Yes "adult" or mature content blogs are allowed but pornography is not allowed.
From the TOS http://en.wordpress.com/tos/
•Post explicit sexual materials that can be considered pornographic, such as explicit images or video of sexual acts or close-up images of genitalia;
•Post links or banner ads to adult-oriented affiliate networks, such as pornography site signups;
•Post links, text, or images promoting or advertising escort services;
•Post images of extreme violence or gore without associated context or commentary;
•Post images of child pornography;
•Post content that promotes pedophilia, such as blogs with galleries of images of children where the images, content surrounding the images, or the intent of the blog is sexually suggestive.
Here's the support doc regarding Mature Content http://en.support.wordpress.com/mature-content/
We don't have warning banners here but you can create a static front page for that purpose and another page for your posts to display on. http://en.support.wordpress.com/pages/front-page/