To further this topic a bit, I've been doing some research about this whole rating thing and ran across some interesting information.
In the 1920's the industry was on the verge of shut down. Yup, before sound, people wanted the industry censored out the wazoo because it was all so offensive. In 1927, with the advent of talkies, the industry came out with a list of "Don'ts and Be Carefuls." It went like this:
Motion Picture Producers and Distributors of America, 1927
Resolved, That those things which are included in the following list shall not appear in pictures produced by the members of this Association, irrespective of the manny in which they are treated.
1. Pointed profanity-by either title or lip-this includes the words "God," "Lord," "Jesus," Christ" (unless they be used reverently in connection with proper religious ceremonies), "hell," "damn," "Gawd," and every other profane and vulgar expression however it may be spelled;
2. Any licentious or suggestive nudity-in factor in silhouette; and any lecherous or licentious notice thereof by other characters in the picture;
3. The illegal traffic in drugs;
4. Any interference of sex perversion;
5. White slavery;
6. Miscegenation (sex relationships between the white and black races);
7. Sex hygiene and venereal diseases;
8. Scenes of actual childbirth-in fact or in silhouette;
9. Children's sex organs;
10. Ridicule of the clergy;
11. Willful offense to any nation, race or creed;
And be it further resolved, That special care be exercised in the manner in which the following subjects are treated, to the end that vulgarity and suggestiveness be eliminated and that good taste may be emphasized:
1. The use of the flag;
2. International relations (avoiding picturizing in an unfavorable light another country's religion, history, institutions, prominent people, and citizenry);
3. Arson;
4. The use of firearms;
5. Theft, robbery, safe-cracking, and dynamiting of trains, mines, building, etc. (having in mind the effect which a too-detailed description of these may have upon the moron);
6. Brutality and possible gruesomeness;
7. Techniques of committing murder by whatever method;
8. Methods of smuggling;
9. Third-degree methods;
10. Actual hangings or electrocutions as legal punishment for crime;
11. Sympathy for criminals;
12. Attitude toward public characters and institutions;
13. Sedition;
14. Apparent cruelty to children and animals;
15. Branding of people or animals;
16. The sale of women, or of a woman selling her virtue;
17. Rape or attempted rape;
18. First-night scenes;
19. Man and woman in bed together;
20. Deliberate seduction of girls;
21. The institution of marriage;
22. Surgical operations;
23. The use of drugs;
24. Titles or scenes having to do with law enforcement or law-enforcing officers;
25. Excessive or lustful kissing, particularly when one character or the other is a "heavy."
With a fun title like it had, it wasn't really enforced. In 1930, they came up with another code, which was in place until 1968, but it didn't become absolute law until 1934 and for good reason. First, the code was self-imposed, meaning the industry subscribed to it voluntarily. They did it to keep themselves in business. They wanted to make movies and this was the only way to do it. The FCC was threatening federal legislation to govern what content movies would have. They came into the game because a slew of church groups were lobbying for either censorship or shutdown. Not wanting to fall under federal jurisdiction, the industry wisely took it upon themselves to self-regulate and "be nice" as it were for many years. As the years wore onward, certain topics became less taboo and even a ruling by the supreme court opened up certain topics such as drugs and childbirth that were forbidden by the code.
The rating system in 1968 opened up a whole new line of movies to where filmmakers could finally film whatever they wanted to...within reason anyway.
So, it seems the industry did it to themselves to keep the art of moviemaking alive. I took this info from
here.