Sex in video games is an odd thing. For instance, Kratos is allowed to off-screen bang Aphrodite so hard and well in God of War III that her handmaids are overcome by lust and start going to town on each other. You even get rewards for executing this scene correctly. Yet, for a long time sex in games was a big no-no, as they were seen as a children's toy only, and even today it's still pretty scarce. Some designers managed to slip in some cheeky smut every now and then.
Sigh... Just to get it out of the way, Grand Theft Auto: San Adreas had a sex minigame built in that was ultimately cut. However, because some of the animations were used elsewhere, they couldn't just delete it without screwing up another part of the game. The answer was to just make it inaccessible, but a download patch re-enabled the minigame resulting in lawsuits, recalls, and a puritanical brouhaha. Literally the next year, Kratos began his regular sex conquests openly, so who the hell knows why the world went so insane over this?
In level 5-5 of Kirby's Dream Land 2, the level design is supposed to resemble a naked woman's crotch, boobs, and smiling face. Not the most erotic thing ever, especially on a tiny Game Boy screen, but still pretty risqué for what was definitely a game meant for young children.
The only reason I can think of why the Tolkien estate didn't sue Naughty Dog over the RPG Rings of Power on the Genesis was because the game was so bad it would've been like beating up a guy with Down Syndrome. Naughty Dog did slip in a code, though, that would change their logo to the image of a bare-breasted blond by holding down-right and A, B, C, and Start on controller two as the game booted up.
ColecoVision's Smurf game could be beaten in less than four minutes, but it did have one thing that made it worth playing. Due to a programming glitch, if you crouch down just as you beat the game Smurfette's white dress will disappear revealing her naked body for a brief second.
How Banjo Kazooie got an E-rating is beyond knowing. The game is full of hidden curse words, sexual innuendo, and at least one map that is shaped like a cock and balls ejaculating onto a set of hills that look like an ass. Any other game I would write it off as a coincidence, but not this one.
