It's not a move to prevent some nasty type of porn to offend anybody or to block any illegal activity, it's a way for the national gambling monopoly to prevent international competition from stealing their business.
Technically it's done at DNS level, basically all ISPs are supposed to redirect DNS entries for these 516 web sites to a page saying that the site is not available because it's not licensed in Italy. It's easy to route around this configuration by choosing a foreing DNS server, while most users will not know how to do it real gamblers will just keep gambling.
This is the first censorship of this kind in a western country. How long before others will join in and also start blocking other web sites?