the current pixelation fetish is totally due to western influence post 1850 or so. don't even get me started.
I get to jump in with more random info I learned a long time ago that will now make me look super smart!
The pixelation is not a fetish, it is in fact a product of loose-/mis-interpretation of a Japanese censorship law.
A western equivalent can be found in Hollywood movies and TV shows from the 50's. Whenever a man and woman kissed, the woman always kicked one leg back (a common image from that time!). Most people thought it was just supposed to be an unconcious reaction to the passion of the moment, but it was actually done to be in compliance with a law that was being misinterpreted.
In order to allow kissing scenes, even those done while sitting on a bed, but censor kissing scenes with people in bed (i.e. too sexual), a rule/law stating that when kissing the woman must have one foot on the ground came into effect. The movie creators thought that meant ONLY one foot was allowed on the ground!
Similarily, after the west started influencing Japan, the Japanese became very selfconcious about the openness of their culture in the eyes of the decent westerners. Just like many other countries, they tried to tackle the problem of outlawing obscene pornography while allowing nude art. In an attempt to differentiate between art and porn, they created a law stating the nude body can be shown but actual genetalia can not.
So now, in order to comply with the law, people simply put a smudge over the genetalia and proceed as normal.