I agree with the above comment, once hormones kick in, that's it! At that age, masturbation is about the only thing on the mind. His world has opened up and whenever he sees a girl, he's eyes probably light up! It's normal however, not in the living room. He's going to do it in his room, in the shower. As he was suspended from school, i would be having a big conversation to him about what happened and that your not going accept that from him. I'm a teacher and hear some of the most vulgar comments from students. If he is interacting with younger kids in the park appropriately, i wouldn't worry.
It's normal. My husband always tell me that we going to loose our son to masturbation from around age 12, 13 until 15 or 16. You should definitely talk to him about talking to girls and masturbating in the living room. Let him know what is inappropriate and this should be done in privacy of his own room. You definitely need to get computer out of his room for his own safety and put it in a room that you can see what he is doing. This is natural he found his penis. He will play with it until he will find himself a girlfriend. He is not perv because he is looking at Gweneth Paltrow. If he was looking at some magazine with little kids then I would worry about this.
Does he have access to a computer? If so check the history, he may be looking at pornographic material. Mabey have a talk with him about it.