Unfortunate Character Design

That's supposed to be his knee. *Supposed to be.*

Let's face it, some characters look odd. Something about their design makes them look ugly, or freaky, or... phallic.

Please note that this trope only applies when:

The design is obviously unintentional (or at least probably not intended by the majority of the creators), and not meant as a Parental Bonus or Getting Crap Past the Radar.
The offending part is pretty obvious (if you think you're the only one who ever noticed, it probably doesn't count).
The character looks so distracting that it can never be unseen.

See also: Freud Was Right, Nude-Colored Clothes, Accidental Innuendo. Will often be Nausea Fuel.

No real life examples, please; real people are not designed.

Examples of Unfortunate Character Design include:

Advertising

The design of the London Olympics logo. Otherwise known as the "Lisa Simpson Blowjob" logo, it has since been recolored purple to remove the unintended allusion, but Google Image Search will still show the old design in a few results.
In a non-sexual example, the logo of the 2014 FIFA World Cup in Brazil is surprisingly reminiscent of something else.
The Storage Deluxe logo resembles the famous "Dick in a Box" skit.

Anime and Manga

Digimon: WarGreymon has a mostly human anatomy. He also eschews pants in favor of a skimpy black banana hammock. The front of said banana hammock features a piece of armor with a very suggestive shape.
- The Savers redesign of Yatagaramon also suffers from this. He has a white mane that really stands out thanks to his mostly black and purple design. Said mane is braided into a single rope that dangles freely with a bell to each side of it. Guess we should call the savers version the four legged crow.
Near end of Yakitate!! Japan, Kirisaki transforms into a giant hulking bread monster made of all the breads the Pantasia team has ever made over the course of the series...with Suwabara's turtle bread covering his crotch. Even better, when he's finally defeated, he shoots his crotch-turtle at Azuma as a Desperation Attack.

Film

The alien in Alien Trespass is... well, phallic. The director, in an interview with Fangoria, stated that he pointed this out to the art designer, who answered "I was afraid you'd say that" and put tentacles at the top to try to counteract this. Its spaceship looks like the female counterpart, as well - and again, the art designer's response when called on it was "I was afraid you'd say that!"
Bill Corbett on the Romulan ship in the Star Trek reboot movie: "Look, a giant space sphincter!"

Live-Action TV

Yo Gabba Gabba!: Muno is a one-eyed monster who... looks like a giant red dildo.
Doctor Who has had more than a few unfortunately designed monsters, but the most famous is probably the ambassador from Alpha Centauri. The cloak he's wearing is a last minute attempt to cover it up. The complaint simply changed from "It looks like a giant dick," to "It looks like a giant dick with a cloak on." Then there's the Vervoids...
The Blessing from Torchwood: Miracle Day is revealed to be a fissure underground which some have remarked looks like a vagina.

Toys

A really surprising number of the 1980s Battle Beasts figures were like this, with their cybernetic armor sporting crotch fins, guns, sliding panels, or just highly suspicious protrusions.

Video Games

Kingdom Hearts 2: This Dusk looked a little happy to see our keyblade hero.
Yoyo's battle sprite from Bahamut Lagoon makes it seem like she has a giant chin, due to her clothes' neckline making her neck look like it's part of her face. (Thankfully, she gets a better sprite halfway through the game.)
With Final Fantasy XII's character design being extremely realistic, Vaan's drawn-on chest... shadow... things seem very much out of place.
Most golems in Baldur's Gate wear loincloths that look just a little too much like giant flapping dongs.
Ganon's sprite design in the original The Legend of Zelda has confused a lot of people with some of his poses. Is he pretending to be a catgirl when Link walks in?
- This same game attempted to give Link irises and pupils. Actually, since each eye is two pixels high, he just looks like he has four eyes, which is talked about here.
- The Kikwis from Skyward Sword as a whole seem to be scrotum-shaped, with Bucha the Kikwi elder being the most evident of them all.
On the subject of strange 8 bit sprites, Big Mario in the original Super Mario Bros. has eyes shaped like letter "L"s. It's possible they were supposed to look like they were reflecting light, but that doesn't excuse the fact that his head is permanently twisted at a 90 degree angle to the rest of his body. The compilation remake Super Mario All-Stars just uses the much-improved Super Mario Bros 3 sprites.
In Final Fantasy Tactics Ramza's sprite changes from chapter to chapter. His last costume contains pants that, due to the sprite artwork, look like they are totally skintight and riding quite far up his butt crack. Fans of the series have affectionately dubbed the disturbing garments the Buttpants.
Garnet's trance form in Final Fantasy IX has some design elements that bear an unfortunate resemblance to a bare bottom.
- Likewise, it wasn't such a good idea to give Eiko pants that are almost the same color as her skin, since it makes her look like she's nude from the waist down. Add to that the fact that she looks very, very young and most fans react with Squick.
Daryan Crescend from Ace Attorney, with his oversized, phallic pompadour with a patch of white on the tip.
Pokémon has numerous examples:
- Cloyster is one of the first and most infamous, since the the shape of the shell and the position of its main horn look very much like a vagina.
- Jynx's original design was so controversial that Nintendo actually had to redesign her. Just compare her original look to her new one.
- Palkia is perhaps the go-to for "most unintentionally phallic-looking Pokemon design".
- Back when the Fur Affinity boards allowed people to publicly report potential site violations, a perfectly innocent and accurate drawing of a Floatzel was reported for not being marked as mature content.
- Reshiram has an unfortunately-placed tuft of fur, as does Beartic (though not as extreme, the fact he evolves from a cute little teddy bear might make it a little worse).
- Registeel's Generation IV sprite has his right arm raised in a Nazi salute. This was fixed in Platinum and later versions.
- Some people have noticed how Keldeo's official artwork makes it look like it has a butthole. It's unknown if this was intentional.
In King's Quest III, because of the limitations of the graphics, the protagonist's sprite has a solid line of red pixels for eyes, making him look like Cyclops.
In the Xen level of Half Life, the Gonarch's egg-sack looks like a huge scrotum. Half-Life 2: Raising the Bar makes this seem much more intentionally.
Compare BioShock (series) 2's box art and the titular Bomberman. You'll never take the former seriously again.
This Metal Gear Solid 4 promotional statue. Snake's outfit is not unfortunate unless you're allergic to shameless female-aimed fanservice, but the placement of that lamp seems to be trying a bit too hard.
The dragons in Adventure look less like dragons and more like freakin' ducks.
In Final Fantasy VI, Kefka Palazzo's final form is clothed in nothing but a waistwrap. Unfortunately, one of the folds ended up in the wrong place, which makes Kefka seem like he's a little too happy to see you. This was promptly acknowledged by many, many people.
Eusine's official art for Crystal. Look carefully at his right hand... looks kind of like he's flipping us off, doesn't it?
The Orc Chasm in Kingdom of Loathing is shaped quite a bit like a vagina, though given the name this was probably intentional. The valley beyond it was originally represented by two mountains a short distance apart from each other with a row of trees at the bottom, looking uncannily similar to two knees and pubic hair. This was allegedly accidental on the artist's part, and it was eventually edited to use the same graphic as its predecessor.
This article should tell you everything about what's wrong with the box art for Touch Detective 2 1/2.
Street Fighter IV: Just try to unsee this image. Poor Sakura...

Visual Novels

In the OEL murder mystery visual novel Jisei by sakevisual, the protagonist finds a wad of bloody tape thrown away in the men's bathroom. The tape is thick and white and has a huge red bloodstain right in the middle and looks sort of like... Well, you know...

Web Comics

Invoked Trope in this Penny Arcade comic.
Frequently lampshaded in Homestuck where the characters's sprites have no arms.

Western Animation

One notorious example is the preacher from Disney's The Little Mermaid, whose knees closely resemble an erect penis. And that's not even getting into the phallic tower that slipped into the home video boxart...
- Hehe, you said "slipped into".
This video starting at around 4:32. With the company that made it, this sort of thing is to be expected.
From the Arthur episode "Arthur's Birthday" the woman working as a cashier who suggests blowing square breaths for square balloons to D.W. looks high.
This may or may not have been intentional but the head cat of Birds Anonymous from the Looney Tunes short of the same name appears to be high.
Barricade from Transformers Prime, whom according to TFWiki, has a crotch shaped like Bonecrusher's face.

Real Life

A crucifix in the St. Charles Borromeo Catholic Church in Warr Acres, Oklahoma, depicts Jesus with a distended stomach and abs - which some critics say looks a bit too much like an erect penis and scrotum. The clergy response was basically "Whatever," and they refuse to discuss the controversy any further.
As if the vaguely phallic-shaped unicorn-crest on the head of Tsintaosaurus wasn't enough, some illustrations (and an infamous toy) also gave it two, inflatable sacs at the base of said crest.