The word
hentai in
Japanese literally means "
change" or "
transformation," just as the
English word "
perversion" does. In Japanese,
hentai means just that: perversion, perverted sexual desire, or a person who is perverted.
Rape, sexual obsession,
scat, and
pederasty are
hentai -- attractiveness, nudity, and "normal" consensual sex are not.
In Western anime-fan slang usage, hentai usually means "sexually explicit", or "sexually explicit anime". Hence the countless porn sites advertising "hentai pictures" or "hentai mangas" -- meaning nude or sexual scenes from Japanese comics, animation, or games. Most of these are not hentai in the Japanese sense, and Japanese-speakers are evidently baffled that Western otaku would ever refer to anything as both "hentai" and "kawaii"!
Etchi or ecchi, based on the Japanese pronunciation of the letter "H" and originally short for hentai, has a very different connotation in Japanese. It means, more or less, "lustful" or "sexual". A person who's etchi is sexually interested; a manga which is etchi is sexually arousing or explicit. To "do H" with someone (etchi suru) is to have sex.
For more information on what is hentai and what is etchi, please see: http://home.attbi.com/~kagamix2/H_does_not_mean_hentai/