On wikipedia

[JG]

"Fruit machine" is a jocular term for a device developed in Canada that was supposed to be able to identify homosexual people, or "fruits". The subjects were made to view pornography, and the device measured the pupils of the eyes, perspiration, and pulse for a supposed erotic response.

The fruit machine was employed in Canada in the 1950s and 1960s during a campaign to eliminate all homosexuals from the civil service, the Royal Canadian Mounted Police (RCMP), and the military. A substantial number of workers did lose their jobs. Although funding for the "fruit machine" project was cut off in the late 1960s, the investigations continued, and the RCMP collected files on over 9,000 suspected homosexuals.

The chair was like one from a dentist's office. It had a pulley with a camera going towards the pupils. There was a black box in front of it that showed pictures. The pictures ranged from the mundane to sexually explicit photos of men and women.

People were told the machine was to rate stress. After knowledge of its real purpose became widespread, few people volunteered for it.

There is no evidence of scientific validity of the machine.

[mr lugsy]

i have heard of this device also,i must admit though i thought it was an urban myth.
the "fruit machine" was also used to a lesser extent on different sectors of the canadian workforce .
the royal canadian forestry commission(r.c.f.c.)were amongst those to trial its use right upto then mid 70's under the guise of an aptitude test.
the r.c.f.c. were concerned that a sizeable minority of its tree felling division had brought its once macho reputation into disrepute.
many of the lumberjacks escaped the testing that took place every wednesday afternoon,this was mainly due to the fact that they would ,on a wednesday go shopping and have ,erm,buttered scones for tea.

http://www.youtube.com/watch?v=5zey8567bcg

[Stevie S]

first fruit machine (one arm bandit) payed out in bubble gum me thinks.

[Mattb]

Correct, hence the name.

[aaamusements.co.uk]

many of the lumberjacks escaped the testing that took place every wednesday afternoon,this was mainly due to the fact that they would ,on a wednesday go shopping and have ,erm,buttered scones for tea.

I was expecting a reference to that sooner rather than later...