When films first began there was no rule governing what could be shown in the U.S., but there were concerns.  Individual states would often decide what would be allowed within their own theatres, which resulted in each state editing the film as they saw fit, leading to a large number of versions of the same film across the country.  You could easily see one version, drive across the state line, and see another version twenty minutes shorter with many scenes changed or omitted altogether. By the 1920s there was an outcry, mostly from religious groups and women clubs, that movies were going too far.  Due to pressure from these groups and a fear that the government might step in and put forth federal regulations, Hollywood made the decision to band together and regulate themselves.  To do so, in 1922 they formed the Motion Pictures Producers and Distributors of America (MPPDA) and put William Hays in charge.  Hays created a set of recommendations known as “the formula” to keep movies within a morally acceptable boundary.  A greater list of don’ts and “be careful” would follow within a few years. In 1930, The Motion Picture Production Code became the final word on movie ethics and would be come to be known as the Hays code.

Hays had put Jason Joy in place as administrator of the MPPDA, to review movies and make suggestions to the studios on changes that should be made to make the movies more publicly acceptable.   Joy also worked as a publicity agent for the industry attempting to quell any public outcry against movies that were found to be upsetting.  Joy and his next successor were very light in enforcing the code’s first years.  This original code was mostly created to deal with movies showing sex or crime.  Since in 1930 Horror was still a year away from becoming a major screen presence, there were no rules drawn up that took their themes into account.  Showing such dark things on screen was beyond the code and the makers’ imagination at that time.  Besides, at this point the MPPDA could do little more than make suggestions.  They could not enforce them. 

During the first four years of the code movie makers were free to ignore suggestions as they saw fit, though most generally stuck to the suggested changes.  But after Dracula became a major hit and was followed by another horror success in Frankenstein, more horror movies began to appear, and the moral majority took notice.  As did Joy and Hays.  Meanwhile state Censors continued their habit of cutting movies according to their own desires. 

In 1934 Joy was replaced by Joesph Breen who had a far stricter idea of what movies could and could not show and a stronger dedication to censorship.  To control the content of this slew of horror movies that were pushing the boundaries of what he considered moral and in good taste, it was decided that each movie reviewed by the MPPDA would be granted a certificate of approval once it was deemed acceptable.  One could show a movie without such a certificate but finding willing theaters would be difficult and would risk being ostracized by the public. 

The decisions made granting approval were made behind closed doors and no one making the movies knew the factors used to decide approval, so few horror movies were made during this time.  Those that were made were in danger of being slashed radically and losing all impact and coherency.  Eventually there was pressure put on the MPPDA to produce a listing of what was deemed acceptable and what was not.  Clearly, the rules set forth were written with religious implications in mind as they included such rules as the evil always had to meet some form of punishment, and priests and minsters could never be shown as comical or villainous.  However, surprisingly, while many scenes of horror were removed or lessened, many scenes were left in that implicated far worse things and even things explicitly mentioned in the Hays code as unacceptable.  It seems most censors were looking at content and missing much of the context.  A great number of things got through the code by being hidden in plain sight. 

One of the first blows to the code were two movies released in 1946, The Outlaw and Duel in the Sun that were released without a code of approval, as they refused to censor their movies to meet demands.  Both movies were highly successful.  More damage was done to the Hays code in 1952 when the U.S. Supreme court reversed a previous ruling and stated that films were included as free speech and protected by the 1^st amendment.  The code rules were further weakened and application became lax as the advent of television, drive-ins (which did not concern themselves with certificates of approval) and an influx of foreign films (not bound by the code) caused Hollywood studios to once again begin striving to make movies that could compete.  Movies would again begin to push boundaries, especially horror.

Eventually, a new system would be required.  In 1968 a new plan was enacted, instead of lumping all viewers into one group and deciding what was allowed for all, the US came up with the current rating we see used today. 

During the time of the Hays Code, especially the 1934 through late 40s, horror movies were greatly affected.  As mentioned, far less were released as many of their ideas were too risky to attempt in this censored environment.  Others were released but had to soften the horror or change the impact of the film.  For example, the original end of The Bad Seed, had the young child’s mother die and she survived to continue her evil unabated and undiscovered.  Due to the Hays code a new (and somewhat arbitrary) ending was tacked on where the child is struck by lightning at the end and killed, showing that evil did not win out at the end.  Conversely, some people claimed that the Hays code did films a favor, forcing writers and directors to be cleverer in getting their points across.  Using more subtle methods than in your face scenes to show horror, homosexuality, violence, gore and sex and other scenes to get their message across.  Others point to movies such as Casablanca whose famous ending came about in part because the Hayes Code would not allow for a sexual relationship between the leads due to Ilsa being married to another.  It also helped horror develop outside the Hollywood system as independent movie makers were not subject to the Hays code.