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According to a radio interview I just heard with the opposition shadow minister Malcolm Turnbull on TripleJ, this is a "software filter" that ISPs will install and enable on "home broadband routers and smartphones" by default, and there will be "no server-side filter".
While this of course sounds terribly stupid, pointless, costly and technically infeasible, it also sounds fairly innocuous as far as these types of proposals go.
It sounds like users would be able to enable/disable it whenever they like, without adding their name to a central database at the Ministry for Censorship (unlike the UK proposal?). He declared that the point was to enable this kind of filtering for people who aren't technical enough to set it up for themselves, and that ultimately the decision and responsibility lies with parents.
In fact, it sounds a lot better than the system the current government (who is of course already criticising this policy) tried to ram down our throats recently.
(Disclosure: I just heard about this policy on the way home from voting early, and the intent of my vote was to benefit the current governing party more than the opposition proposing this system, after my preferred minor candidates are eliminated...I like Malcolm Turnbull a lot, but I don't like his party's policies any more than I suspect he does, at the moment.)