The acronym LGBT is used to represent the Lesbian, Gay, Bisexual, and Transgender / Transsexual community. Essentially, it represents characters who are not attracted only to the opposite sex or identify themselves as their gender of birth. As alternative sexual lifestyles have become more widespread in the world, they have also seen more representation in video games. Over time, a character's sexuality in video games has become more important, mostly for plot purposes. In some cases, such as in the game Fear Effect 2: Retro Helix, though the player character is a lesbian, it is not considered forward-thinking, as this is mostly used for cheesecake shots of the heroine relaxing with her girlfriend in their underwear, more for sexual appeal then anything else. In many cases, the gay characters tend to be jokes, such as Jolly Roger in Banjo Tooie.
Early on in the gaming industry, gay characters were very uncommon. Likely reflecting the views of most people, Nintendo and Sega often censored any content relating to homosexuality. For example, in the Japanese version of Super Mario Bros. 2, the character Catherine was described as a male character who wished he was a female. Although this was initially carried over into American releases - the manual for the game describes the character (known as Birdo in America) as a male who wishes he was a female, and asks people to call him "Birdetta". Although the Japanese games have continued to describe Catherine as a cross-dresser to this day, Nintendo of America's official stance has changed to the idea that Birdo is a genderless character. Sega also censored homosexual content in their console making days. One example is the game Streets of Rage 3, which originally featured a gay villain, who was removed in the American release. It is to note that often characters are not openly gay, or it is stated in any way or form, but stereotypical behaviors (such as overly flamboyant characters) often imply the sexual orientation of said character.
However, the industry as a whole has become more favorable to the representation of homosexual themes. Gay characters have been featured in the Persona series, Banjo Kazooie, and other titles. Some games, such as The Sims 2 allow players to create same-sex relationships. Of course, homosexual themes have always been met with unrest. There was great controversy over a brief scene of sexuality in Mass Effect between a human female and an asari, a race of genderless beings who all resemble females.
There are also a number of bisexual characters in games. It is very common to see bisexual vampires in video games, such as Dmitri from Darkstalkers, or Vamp from the Metal Gear Solid series.
In some cases, localization differences between regions can cause characters to suddenly fit into this concept or seemingly have no relation to it. Two enemy characters from Final Fight, Roxy and Poison, are perhaps the most well known examples. Roxy and Poison were originally designed as female gang members who fought the player alongside their male friends. When the game was originally released, women's rights groups protested the presence of violence against women in the game. Although it was attempted to alter the sprites into new characters, the busty, thin-waisted Poison and Roxy just could not be altered that way without removing the sprites entirely. Therefore, in the original arcade release the the sprites were left intact and the two characters were referred to using Japanese slang roughly meaning transgender, under the idea that the characters being trans women would provide enough leeway on their gender to avoid possible lawsuit. Akira Yasuda, the designer behind Poison and Roxy, would later state that he views the American equivalents of the characters to be transgender, but not the Japanese versions. On the other hand, in the Japanese Version of Paper Mario: The Thousand Year Door the character of Vivian is heavily implied to be a trans woman, referring to herself as one of the three Shadow Sisters, only for her sisters to berate her by insisting that she is a boy. The Italian localization would take this one step further by having Vivian respond to her sister's insults by stating that she's proud to have become a woman. These scenes were changed in the English localization to remove any mention of gender difference, instead being replaced by Vivian calling herself one of the three Shadow Beauties, only for her sisters to call her "plug-ugly".
It was until recently, starting around the early 2000s, that game developers decided to break some of the habits and taboos that society and game industry standards have placed upon them. It was then when game developers like Atlus, Konami, Rockstar and Lionhead Studios started taking a different approach to developing games that contain an aspect of sexuality and/or relationships.
In Atlus' Persona 2: Innocent Sin, it was possible for the player to have the male protagonist pursue a relationship with either female or male characters, though this aspect of the game may have prevented the game's release outside of Japan until the game's 2011 PSP release. Hideo Kojima's Metal Gear Solid 2: Sons of Liberty had two characters, Vamp and Scott Dolph, who were later revealed to be bisexual, which was not obvious at first since they were not portrayed stereotypically, whereas the straight male protagonist Raiden was portrayed with androgynous and effeminate characteristics. As a result, these characters proved controversial with fans at the time. Despite the initial reactions, gay/bisexual characters were later more accepted by fans of these series, such as Colonel Volgin in Metal Gear Solid 3 and Kanji in Persona 4.
Peter Molyneux's video game Fable allows the player to play as a male and marry, and then have sexual relationships with, both men and women. This continued in Fable II where same-sex married players could even adopt children. Rockstar's game Bully, in which the player controls a troubled teenager in a boarding school, also has the objective of giving females flowers and chocolates to be able to kiss them. Many players were shocked that this also worked for specific males in the game. First believed to be a bug, Rockstar later confirmed that the minor bisexual content was not a bug by making it an Achievement (in the Xbox 360 version Bully: Scholarship Edition) to kiss twenty members of the same sex.
Another fact that often determines the appearance of a gay character in a video game is when the game is based on a TV series or movie, which already contains gay characters. Since movies and TV shows have less strict regulations on what they can include, these characters are then often simply implemented in the game, without them having to express any signs of being gay. While these characters are in their essence homosexual because that is a part of their character make-up in the TV series or movie, the games themselves generally do not show anything that would make the player assume that these characters are gay.