In October of 2001, the US Supreme Court heard arguments over whether or not the government can ban "virtual" child pornography -- computer-altered or generated images that don't portray actual minors engaged in sexual conduct but do "appear" to portray such conduct.
The case grows out of the 1996 passage of the Child Pornography Prevention Act (CPPA). Now part of Section 2256, Title 18 of the US Code, CPPA is the first law to make it illegal to create or possess images of child pornography even when the images have been made without the participation of any real children.
The judge hearing the case upheld the law, however, writing in his decision that CPPA "clearly advances important and compelling government interests: the protection of children from the harms brought on by child pornography and the industry that such child pornography has created."
In 1999, the US Ninth Circuit Court of Appeals in San Francisco ruled in the coalition's favor, declaring that the parts of the law that ban "virtual" child pornography "do not pass constitutional muster" and do indeed violate the free speech guarantee of the First Amendment.
"It is not uncommon in movies to have a scene where a minor 'appears to be' involved in sexual activity," Sirkin explains. "Under the law, films like 'Blue Lagoon' and 'American Beauty' would be illegal."
While few people believe a court would actually apply CPPA to these films, the fact that one could makes Sirkin and the Ninth Circuit Court of Appeals nervous.
http://www.crime-research.org/library/Illegal1.htm