There's always been a bit of confusion regarding deviantART's policies as they pertain to user avatars. Well, now we're going to clear that up for everyone, once and for all. Read on for explanations of how we treat avatars and why.

Use Of Copyrighted Materials In Avatars
Unlike user submissions, there is no implication that user avatars are one's own artwork. Therefore, it is permissible to use artwork that is not your own in your avatar so long as we receive no complaints about its use from the original artist.
That is to say, if you have a Dragonball Z avatar, then you're in the clear, unless the producers of DBZ decide to start cracking down on use of those images across the internet.
However, it is inadvisable to use the art of another deviantART artist without their permission. The batties (characters resembling my icon) are a perfect example of this. The batties were made for their users by one deviant, and those of us using them as avatars have been given permission by that artist to do so. It's well known to many folks that she doesn't like unauthorized batties being used, so unauthorized batties would be in violation of this policy.

Use Of Nudity In Avatars
Due to the fact that user avatars appear everywhere on the site and receive no obfuscation from the Mature Content system, it is necessary that we be more cautious of nudity in avatars.
deviantART has an obligation to work to keep its public face at or below a PG-13 level. Thus, any blatent nudity in avatars will be regarded as being in violation of this policy. If nudity is seen in an avatar, but it is not entirely gratuitious, it may be allowed to remain.
As with our nudity policy for deviations, the implementation of this is very much dependent on the judgement calls of DA administration. Therefore, if you're not sure if your avatar has gone too far or not, ask.

Use Of Avatars In Creating Icon Mosaics / Abuse Of Icons
The user avatar system may not be used to create mosaics in comments or journal postings. This constitutes abuse of the comments system. Likewise, one should be mindful of how many images he or she is requiring a viewer's browser to load when adding lots and lots of avatars to a comment or journal entry by using :iconDEVIANTNAME:. This is an issue of courtesy - not everyone is on a broadband connection, and forcing their browser to download hundreds of avatars at once is burdonesome. Abuses in this fashion will be addressed on a case by case basis.

Reporting Violations Of The Above Policies
If you see someone with an avatar you believe to be in violation of the above policies, feel free to send a note to any policy violations administrator - +anon-y-mouse, +mooboy, $euphoria, +brazensix - or any core administrator - $dygel, $jark, $realitysquared, et cetera. You could also submit a request to the Help Desk, and it'll get forwarded to one of the appropriate people.

These policies will be added to the etiquette policy shortly, so that they may be reviewed by anyone, anytime in the future.