The M rating really stems from blood and sexual themes. There is language, but nothing too harmful (damn and sh-- is all it is). The blood can be a bit much, sometimes in a fountain of itself from the fallen enemy. Sexual themes are avoidable, but it is part of the game. You can flirt with a member of the opposite or same sex and eventually marry them and down the road, have sex.
You don't have to marry, though, or even have sex when you do get married, so there's no real problem with the sexual themes if you avoid it. I do hear in the Lost Chapters (the expansion for Xbox; game for PC), that there is a bordello in the game that has some quests invovled in it.
Fable is really a fun game, though. You can become quite rightgeous doing the right thing and people praise you gloriously for it. Walking into the town and people clap and cheer for you and the ladies swoon at your step.
People always say video games show too much immoral behavior and reward you for it. Fable doesn't do that. If you act evily, people will run in fear of you, they have a large dislike for you, and your appearance takes a hard hit as you go down the naughty path. If you act rightgeously, you will be praised, you get better deals, and are basically rewarded for your good efforts (i.e. looking pretty good for a 60 year old).