The short version: The court says violence is different than obscenity. From Scalia's opinion:
"California’s argument would fare better if there were a longstanding tradition in this country of specially restricting children’s access to depictions of violence, but there is none. Certainly the books we give children to read - or read to them when they are younger - contain no shortage of gore.Grimm’s Fairy Tales, for example, are grim indeed. As her just desserts for trying to poison Snow White, the wicked queen is made to dance in red hot slippers “till she fell dead on the floor, a sad example of envy and jealousy."
I like Scalia, but to compare time-worn Grimms to today’s violent video games is like apples and oranges.