Video games have been controversial since the days of Pong. A game called Death Race, (inspired by the 70's movie) was allegedly pulled off the market once the rumor circulated the blocky little creatures getting run over in the game were meant to represent little old ladies!
http://www.youtube.com/watch?v=iFSkL3W9yRg
I never encountered one of these machines in an arcade, and I visited plenty of arcades in the late 70's.
Even Castle Wolfenstein in it's original 2D incarnation was a tad controversial.