I worked in a library for five years, as a page. It didn't happen often, but once in awhile I did catch people looking at porn on the computers. I never did say anything to my boss, because I felt squeamish about reporting such things. I regret not doing it now, I agree that watching pornography near others in a public space is an uncomfortable act.
As for whether or not porn should be in a public library at all, I'm not quite sure what to think. Is it appropriate to put in a 18+ section of the library? I don't want a main function of libraries turn into providing smut to users. On the other hand, why shouldn't people have access to materials if they want them? Maybe pornographic materials should be available for use at home through a library's site, but not in the actual library? Just a thought.