Due to a disturbing lack of information regarding this somewhat obscure set of arcade games, I have taken on the task -- nay, the duty -- of exhaustively researching this topic for the benefit of all mankind. My wife wholeheartedly supports this undertaking. She kicks ass.
Call me a hentai gaijin if you like, but this series of games is actually a lot of fun even when divorced from the ecchi aspect of it. (Though I can't deny the fact that the gratuitous nudity certainly doesn't hurt.) Whether it is "pornographic" or not depends on your definition; while the nudity in the game is certainly designed expressly to titillate, it is strictly softcore and is never more than topless.
Developed by Kaneko, which brought us the original Bonk's Adventure along with, well, nothing else of notoriety (unless you consider games such as Jump Coaster and Air Buster to be arcade classics), Gals Panic borrows its gameplay from the classic game Qix, except that the goal is to draw lines to uncover a percentage of a silhouetted female body, instead of a portion of the playing field.
Gameplay
Instead of the "Qix" roaming the board, there is a particular boss character, ranging from giant tarantulas to giant metal snake monsters. These boss characters perform various attacks, such as spawning a bunch of tiny enemies, creating webs to slow down your diamond thing (or whatever it is), or launching fireballs at you. The tiny electric charges from Qix that travel along lines and home in on you are gone (though they are present in the form of a boss attack), making the game much slower-paced. In addition, various powerups litter the playing field, allowing you to do things such as speed up your player, or temporarily freeze the boss player.
As soon as the player reveals 80 percent or more of the silhouette, the round is over. The goal is to win with as high of a percentage as possible (just as in Qix), which means the last "uncovering" move should reveal as large of an area as possible. Depending on the game, various bonuses occur for getting higher percentages.
Gals Panic 1
The various games in the Gals Panic series vary significantly, both in gameplay and in, uh, background art. The first game allows the player to select from six different Japanese women, which are represented as lifelike drawings on the playing field. Play consists of three rounds, with the woman wearing less clothes in each round. At the end of the third round, the drawing is replaced with a photo of the woman in the same pose. Above the playing field there is a counter that moves from left to right; if the counter moves all the way to the left, the background picture will change to something extremely odd, such as a cartoon ninja, forcing you to gain points in order to switch it back. I haven't been able to determine the rules for gaining/losing points on this counter, except that you seem to gain points for enclosing enemies (thus killing them) or revealing portions of the playing field that are not part of the silhouette, and you lose points by revealing large portions of the silhouette at once.
The first Gals Panic also has some of the most hilarious dubbed voice samples ever to grace a video game; a sound clip such as a theatrical moan or a phrase such as "I want to be yours" is played when a round is won. Seriously, their phenomenal lack of acting ability makes your average porn sound like a Broadway production.
Higher winning percentages result in a "congratulations" message or something of that sort. There is also an "extra game" similar to the Price Is Right's big wheel, where you can earn various powerups for the next round.
Gals Panic 2 and 3
These two are not currently emulated by MAME, so no playtesting is available. Screenshots show Gals Panic II to be more or less the same, although promotional material notes the addition of eight-way joystick controls and a two-player simultaneous play competition mode, along with "'Visual Discretion' options" providing "greater location versatility", and notes that the game features 65 different women from all over the world. Let's hear it for internationalism.
There is very little information regarding Gals Panic 3. One can only assume that it is very similar to the previous two games, with new (*ahem*) graphics.
Gals Panic 4 Yuu ("For You", get it?)
Gals Panic 4 Yuu is a radical departure from the earlier games, as the former photographic models have been replaced by anime-style drawn characters. But what's more shocking is that it apparently has no nudity in it whatsoever; this seems to be the only game in the series that is completely rated PG. Rather than the character losing more clothes in each round, she is simply in a different outfit.
Other than that, the gameplay has changed considerably. The counter at the top of the screen is completely gone (a good thing, as it was totally perplexing and added very little value to the game). Rather than starting on the edge of the picture, the player starts in a randomly-defined box in the center of the image, and there are no lines along the picture edges -- the player must draw them. In addition, the picture may now scroll either horizontally or vertically, and the enemies are larger and attack far more often. Finally, the player can earn "Panic Attacks" that can be used to fight back against the boss; many of these in rapid succession will slow it down, stop it entirely, or destroy all of the smaller enemies on the screen for a limited time.
If the player beats a round with a score of over 90 percent, (s)he is treated to "Show Time", which is essentially a bromide of the character in a somewhat revealing outfit. It's still nothing that your kids wouldn't see at the typical Disney movie, though. It's possible that there is some actual nudity in this game somewhere, but I certainly haven't found it; however, this isn't a guarantee, so don't go around letting little Billy near it, unless you're prepared for the possibility of him suddenly gaining an education.
Gals Panic S - Extra Edition
Apparently, Kaneko learned that no matter how interesting the underlying game was, fans of Gals Panic expected nudity. Gals Panic S continued using anime drawn characters, but put them in considerably more revealing outfits. It also eliminated the three rounds per character, using only a single round instead.
Gals Panic S eliminated the "Panic Attack" aspect of the game, instead sprinkling powerups over the field. When a player is killed, his or her powerups explode into the field, some of them traveling along the lines, ready to be picked up. (Presumably, this would make for a very interesting two-player battle.) After revealing a certain amount of the picture, the screen flashes "SCROOL" (sic) and allows the playing field to scroll to the rest of the picture.
Getting higher than 90 percent results in "Show Time", which is basically a topless pinup-style picture of the character. Note that any nudity outside of these "Show Time" clips is roughly PG-13 equivalent, so rather than just completing the round, the player now has to actually do a good job to get his (or her) jollies. (It would be an interesting psychological experiment, I think, to measure the effect that the promise of boobies has on mental conditioning.) If the player manages to get 100 percent, the reward is "Show Time Deluxe", which is a short topless animation of the character.
S also has another extremely odd "feature": one of the stages is a picture of what appears to be two male Greco-Roman wrestlers, drawn in a very caricatured way; it is obvious that they are meant solely to embarrass the player. Why a game would want to try and traumatize the very folks pumping money into it is perplexing; perhaps it is meant as some sort of test of will?
Nudity aside, the gameplay in S is far more refined than in 4 Yuu thanks to the removal of the "Panic Attacks" which, while interesting, were not all that useful against the boss characters.
Gals Panic S2
This, the final game in the line, continues along the general lines that S set, with minor variations and additions. The most interesting of these is a set of tokens spelling "EXTRA" that can suddenly appear after the player reveals a certain (random) portion of the image. If all of these tokens are captured, tokens spelling "CHANGE" then appear. Collecting these tokens will cause the background picture to change to a more revealing one; usually this new picture has larger "non-silhouette" areas in it as well, which are very useful for trapping the boss in.
Like its predecessor, S2 has "Show Time" at 90 percent and "Show Time DX" at 100 percent. It also has some odd quirks, such as a telephone you can grab on the playing field. Each character also appears to say something about calling a certain number after the round; S2, it seems, actually had a tie-in to a phone sex line! (Oddly enough, the phone number seems to appear whether or not you grab the telephone.)
Clones and Ripoffs
The engine from the first game was used by Comad to create a handful of similar games: Miss World '96 Nude, Fantasia, and New Fantasia, to name a few. Whether the engine was legitimately licensed to them or hacked is not known; however, the sound samples used in Comad's games are almost always pirated from various TV shows and movies, so it's likely that the game engine was acquired in the same manner.
Final Notes
On a whole, the Gals Panic series is a fun set of games to play, though hard enough that it's easy to imagine hordes of lonely salarymen pumping their yen into machines just to make it to the next round. If you try emulating them, you'll need quite a fast computer for all but the first one; my Pentium III-866 goes into seizures trying to handle it.
Finally, a mild warning: Although none of the Gals Panic images show anything that is explicitly kinky, some of the characters wear outfits that are vaguely BDSM-influenced, and at least one character in S2 is definitely meant to appeal to folks with lolicon complexes. If this makes you uneasy, I recommend staying away. But then, if you're already going to play a set of games that revolve around uncovering booty (animated or otherwise), I doubt something like that is going to stop you.
Resources: MAME, Gals Panic II promotional material