The lyrics were fairly innocuous. That was the whole theme of the band. Wholesome enough for Top 40 radio, with just a wink and a nod to its Manhattan gay roots. The record company often diverted songs to other singers/groups that more obviously appealed to the gay nightclub demographic in order to protect the Village People's mainstream appeal. For a couple of years, the record company thought they would be a major money making machine, and a Hollywood movie was made....that co-starred Valerie Perrine and Bruce Jenner (hmmm...it all makes sense, now). But few people saw that disco only had a 5 year shelf life and by 1980 the kids wanted to listen to New Wave, and when the mainstream branded the Village People a "gay disco" band and the studio realized that the gay subculture had moved on to acts that were less kitschy, the return on investment wasn't worth the 4-5 album contract they had signed for.
The studio tried taking the band out of their costumes and music videos (look up the one where they sing about the new phenomena of phone sex) and marketing them to women, but by 1982, the fad was dying out. They had zero appeal to the suburban white kids that could make MTV millionaires out of new and established rock bands.
Only half of the band was gay, the rest were bi and straight. In fact, IIRC the lead singer was married to Phylicia Rashad, the actress who played Cosby's wife on the famous sitcom.
At the time the song was a big hit, I know that some recruiting stations played the song on speakers the public could here in order to bring in traffic.