OK here's a rough explanation for what confounds most westerners about
anime;
tentacle rape (a.k.a
shokushu, thanks
kinglink).
See, as mentioned above, it used to be illegal in Japan to show genitals on film. Now, people still wanted to make porn films, so they had to use something else instead of a penis. Now a tentacle can look for all the world like a penis but not actually be one, so you can get away with it. Of course, if you have a tentacle, you need a monster, and hence a plot that excuses the monsters and the sex. Thus we get things like Urotsukidoji (the original tentacle-sex anime, originally created just as something to make a little money that was far more successful than predicted).
Also, adding to what has been said about big eyes in anime, you may notice that in some anime, the good guys have bigger eyes than the bad guys. The eyes are the window to the soul, so some people have suggested that the difference in size represents the amount of light that has been able to reach the person's soul, i.e the bad guys aren't necessarily evil, they just haven't had enough light reach their soul.
Here's a couple of other things that are useful to know about anime. Firstly, read the node about sneezing in anime. Secondly, nosebleeds in anime. These are symbolic ejaculations. It's a bit like the old train-going-through-a-tunnel sight-gag. If you go back and watch some anime again you might see that you've missed that, and things might make a bit more sense. There are probably hundereds of examples, but the only one I can think of is in Plastic Little where two male characters are spying on the girls who are bathing. It also occurs in live action films though, such as Dead or Alive.
Note: contrary to what an alarming number of people think, anime is not all about tentacle sex and porn and all that. In fact only a small percentage of it is porn. Anime is not a genre, it is a medium; you don't call film a genre, and anime is as diverse as film itself (possibly more diverse as animation allows for greater possibilities). I suggest that anyone who thinks anime is all about porn go and watch some films by Hayao Miyazaki, such as My Neighbour Totoro, Kiki's Delivery Service, or Nausicaa, or others like Grave of the Fireflies, Metropolis, maybe even stuff like Serial Experiments Lain. As with anything, for any good titles there's 20 bad ones, but it's worth seeking out the good ones as they offer something western films do not, and it's a shame that they get tarred with the same brush as hentai.