2. A phrase used in jest as a proxy for anything (often, but not necessarily porn) where you want to be deliberately vague or insinuate nefarious doings without being too specific. For example you could say "this party is boring, I'm going home to watch some midget porn" meaning you have something more interesting to do but can't be bothered to describe what. Or you could tell someone with a computer virus that they need to stop looking at midget porn, meaning that they need to stop frequenting the dodgy website they got the virus from, whatever it my be.
I dunno, never watched it. . .
Francis: "Oh yeah!! Midget Porn!!! that's deadly!"
Paul: "Eh, Midgets?? surre. . . .!"
Gareth: "DAAAMN!?!?! Franny watches baby porn!!"
Francis: "It's not babies it's midget porn!"
Paul: "What's that?! Male babies?!?!"
All: "Franny, your sick!"