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Comics were investigated after a certain Doctor Fredric Wertham brought out a book called Seduction of the Innocent in 1954, calling for the introduction of a self-regulating body known as the Comic Code Authority, that had such ridiculous rules as, you could not use the word "flick" in a comic for fear that the "l" would run into the "i" and Spider-Man would be saying, "Look, he's got a fuck knife!"
For decades, The Comics Code served as one of America's premier Censorship Bureaus (this site even named the page after it for a time).
Back in the 1950s, a moral panic about the corrupting influence of crime and horror comics swept North America, leading to calls for government regulation. To head it off, the the comic book publishers formed the Comics Code Authority as a self-censoring body to prevent the government from stepping in and making a mess of things. Among other things, the CCA -- and its governing rules, known as The Comics Code -- prohibited characters from questioning public authority figures, the usage of revealing clothing, and any depiction of narcotics (even in a completely negative context, which ultimately led to the Code's undoing).
Once in place, The Code killed adult interest in comic books and stereotyped the medium as fit only for children. Numerous publishing houses folded after the formation of the CCA, and William Gaines' EC Comics essentially left the newsstand comics business to focus on Mad Magazine.  Incidentally, Dr. Frederic Wertham, the psychologist who fueled much of the public backlash against the medium with his book, Seduction of the Innocent, denounced the code as a whitewash that made comics worse by removing the consequences of violence.
Major publishing houses Archie Comics (protecting its image of "wholesome American youth") and DC Comics (which, at the time, made most of its money from kid-friendly romance and science fiction titles) more or less forced the Code onto the comics industry. DC also owned Independent News, then the largest distributor in the Code's governing body, the Comics Magazine Association. Dell Comics and Gilberton (publisher of Classics Illustrated) stayed out of the CCA; Dell believed that their company brand and reputation was enough to reassure parents, and sold its comics with the slogan "Dell Comics are Good Comics." Neither publisher's lack of a CCA stamp harmed their profits, as both companies' comics sold well for most of the Comics Code's heyday.
The Code began to lose power in the 1970s when Stan Lee wrote a Spider-Man story involving narcotics. Even though he portrayed drugs in an extremely negative light and wrote the story on the recommendation of the United States Department of Health, Education, and Welfare, the CCA refused to place a seal of approval on the story because of the depiction of narcotics being used. In contrast, the CCA approved an earlier Deadman story where the superhero fought narcotics smugglers because the story focused on the wholesale handling of narcotics. Lee defied the CCA by removing the Code Seal from the storyline, which appeared in Amazing Spider-Man issues #96-98. Lee's story gained considerable public appreciation and critical acclaim, and thanks to all the egg on its face in light of the story's success, the CCA changed the Code to allow negative portrayals of drug abuse -- but even with the change, the CCA would never recover from the damage to its reputation.
Two major revisions -- one in 1971 and another in 1989 -- relaxed and outright dropped many of The Code's stricter rules. The 1971 revision altered some of the stricter and more outdated provisions of the original Code while maintaining its basic structure, and the 1989 revision combined less restrictive views on old "crime, punishment, and sexuality" issues with Politically Correct injunctions against stereotyping.
The Code lapsed into true irrelevance during the 1980s. "Direct market" comic book specialty stores (which the Code didn't cover) cut into sales on the newsstands (which the Code did cover), and as "direct-only" comics from the established publishers became increasingly common, those publishers began to publish more and more comics without the Code Seal. Newer publishers, often producing comics explicitly aimed at older teen and adult readers, ignored the Code entirely.
DC Comics dropped the Code from the majority of their titles shortly after the turn of the 21st century, at about the same time that Marvel Comics withdrew from the Code entirely. In January 2011, DC abandoned the Code entirely in favor of its own in-house rating system. After those major departures, Archie Comics remained the Code's sole participant and administrator, and after concluding that the Code served no purpose in light of its publishing standards -- "We aren't about to start stuffing bodies into refrigerators", said Archie Comics' President Mike Pellerito -- Archie abandoned the Code the day after DC did, thus rendering The Comics Code officially defunct.
On September 29th 2011, the Comics Magazine Association of America announced it had sold the intellectual property rights of the Comics Code seal to the Comic Book Legal Defense Fund (a U.S.-based non-profit organization which helps to protect the First Amendment rights of comic creators, publishers, and retailers by helping cover legal expenses). In a nice little twist, the sale coincided with the annual Banned Books Week campaign.
To learn more about the Code, including its origins, read The Ten-Cent Plague: The Great Comic-Book Scare and How It Changed America by David Hajdu.
The Code (1954 version):
Please note, while some of these guidelines would make sense, others are far too open to interpretation, which was done not by writers but mostly by the CCA. Others are inevitably limiting a writer to Black and White portrayals of morality. And others are just... WHAAAAA??? What's wrong with the word 'Horror'? And take a quick look; there's a lot of repetition of the rules against sex and Fan Service, making very sure there are no loopholes.
- "Crimes shall never be presented in such a way as to create sympathy for the criminal, to promote distrust of the forces of law and justice, or to inspire others with a desire to imitate criminals." (Law forces were not allowed to appear incompetent or corrupt, and there was no such thing as a Punch Clock Villain.)
- "If crime is depicted it shall be as a sordid and unpleasant activity." (Villains could not have committed a large number of successful crimes prior to their introduction.)
- "Criminals shall not be presented so as to be rendered glamorous or to occupy a position which creates a desire for emulation." (Criminals were not allowed to be portrayed as persistently successful, or portrayed as cool.)
- "In every instance good shall triumph over evil and the criminal [shall be] punished for his misdeeds." (The Good Guys Always Win, limiting the potential of story arcs.)
- "Scenes of excessive violence shall be prohibited. Scenes of brutal torture, excessive and unnecessary knife and gunplay, physical agony, gory and gruesome crime shall be eliminated." (No blood and judicious use of guns, thus placing limits on action scenes and the weapons a hero can use.)
- "No comic magazine shall use the word horror or terror in its title. (The pettiest provision, this was intended, so far as can be determined, wholly and solely to put EC Comics out of business.)"
- "All scenes of horror, excessive bloodshed, gory or gruesome crimes, depravity, lust, sadism, masochism shall not be permitted." (Villains could not torture, murder, or rape their victims, and so had to resort to a lot of gloating and outrageous Global Domination schemes.)
- "All lurid, unsavory, gruesome illustrations shall be eliminated." (Less Nightmare Fuel, but less creativity.)
- "Inclusion of stories dealing with evil shall be used or shall be published only where the intent is to illustrate a moral issue and in no case shall evil be presented alluringly, nor so as to injure the sensibilities of the reader." (Forced use of Black and White Morality.)
- "Scenes dealing with, or instruments associated with walking dead, torture, vampires and vampirism, ghouls, cannibalism, and werewolfism are prohibited." (No more zombie stories.)
- "Profanity, obscenity, smut, vulgarity, or words or symbols which have acquired undesirable meanings are forbidden." (No naughty words or any images the CCA thumbed down.)
- "Nudity in any form is prohibited, as is indecent or undue exposure." (No nudity or Stripperiffic outfits.)
- "Suggestive and salacious illustration or suggestive posture is unacceptable." (Worth noting that characters weren't even allowed to sit around and look sexy.)
- "Females shall be drawn realistically without exaggeration of any physical qualities." (No large-breasted female characters were allowed - and of course the CCA decided what was 'large' - nor was any focus on breasts allowed.)
- "Illicit sex relations are neither to be hinted at nor portrayed. Violent love scenes as well as sexual abnormalities are unacceptable." (Basically, limited who the hero could have a romantic relationship with and what kind of relationship it could be.)
- "Seduction and rape shall never be shown or suggested." (Also self-explanatory.)
- "Sex perversion or any inference to same is strictly forbidden." (Gays flat-out didn't exist.)
- "Nudity with meretricious purpose and salacious postures shall not be permitted in the advertising of any product; clothed figures shall never be presented in such a way as to be offensive or contrary to good taste or morals." (Forced aversion of Sex Sells.)
The code (1971 revision):
- "Scenes dealing with, or instruments associated with walking dead, or torture, shall not be used. Vampires, ghouls and werewolves shall be permitted to be used when handled in the classic tradition such as Frankenstein, Dracula, and other high calibre literary works written by Edgar Allan Poe, Saki, Conan Doyle and other respected authors whose works are read in schools around the world." (We can do Monster Mash comics again! But not zombies, which had no accepted "literary" pedigree. Marvel got around this with the Zuvembie, a voodoo-zombie in all but name, and a name with a Robert E. Howard pedigree.)
- "Narcotics or Drug addiction shall not be presented except as a vicious habit." (With a list of specified ways it can be presented. The rule boiled down to it being OK as long as drug use is portrayed as illegal and a bad thing, usually in the context of a Very Special Episode.)
- "Seduction may not be shown." (But unlike rape, now it can be suggested. Femme Fatale and The Casanova characters are now permissible, to a point.)
- "Policemen, judges, government officials and respected institutions shall not be presented in such a way as to create disrespect for established authority. If any of these is depicted committing an illegal act, it must be declared as an exceptional case and that the culprit pay the legal price." (The Corrupt Cop and similar characters may now appear, so long as they are not the norm.)
- "Instances of law enforcement officers dying as a result of a criminal's activities should be discouraged, except when the guilty, because of their crime, live a sordid existence and are brought to justice because of the particular crime." (Before, the Code was interpreted as prohibiting the death of any law enforcement officers, ever.)
- (While there's no specific language about it, the 1971 revision was interpreted as allowing Anti-Hero or Anti-Villain characters up to a point - e.g., Jonah Hex and Marvel's Sandman, who was often portrayed as something of a Punch Clock Villain.)
The code (1989 revision):
- "In general recognizable... social, political, cultural... groups will be portrayed in a positive light. These include... social groups identifiable by lifestyle, such as homosexuals...." (Homosexuality is now OK... But Not Too Gay, in practice.)
- "Stereotyped images and activities will be not used to degrade specific national, ethnic, or socioeconomic groups."
- "Costumes in a comic book will be considered to be acceptable if they fall within the scope of contemporary styles and fashions." (Stripperific fashion might be OK if it's actually part of contemporary culture.)
- "..." (Hey! All the language prohibiting "the walking dead," non-literary monsters, and words like "horror" and "terror" is gone! That stuff's OK now!)
- ↑ The company originally published Mad as a comic book, but later changed to magazine format. Many people think the company made the change to escape the Code -- which did happen -- but in truth, it changed to keep editor Harvey Kurtzman on board.)
- ↑ The Code had always been under the supervision of an Archie employee