You want to use sed twice: once on the blacklist to create a sed program that eliminates every line in blacklist, and then a second time applying that generated sed script to your real data.
First,
$ sed -e 's@^@s/@' -e 's@$@//g' < blacklist.txt > script.sed
If blacklist.txt looks like
word1
word2
....
wordN
then script.sed will look like
s/word1//g
s/word2//g
...
s/word3//g
You might find the use of @ characters above a bit confusing. The normal way of writing a sed substitute command is s/old/new/. This is quite awkward if either of old or new contain a forward slash. So, sed allows you to to use any character you want immediately after the substitute command. This means that you can write s@foo/bar@plugh/plover@ instead of s/foo\/bar/plugh\/plover/. I think you'll agree that the former is much easier to read.
Once you have script.sed generated, run
$ sed -f script.sed < file > censored-file
You can of course use the new-fangled (ie, less than 20 years old) -i option to do in-place editing.