As a hobby translator for this site, I found the following interview quite interesting:
ZVGQ Interview: Clyde Mandelin
Clyde Mandelin is a professional translator, who has specialised on japanese games. He shares some thoughts on localisation, gestures and body language, fan translations and many more. There are also many interesting links to localisation and translation sites.

For a good laugh also have a look at the interviewing site:
Zany Video Game Quotes

Well, those are all about Japanese stuff which is always an easy target to make fun of, obviously. I really think that doing translations is one of the hardest tasks imaginable, because first, you have to be familiar enough with the source language and the culture/society is originates from to get the real meaning of a statement and then you have to try and find an equivalent in the target language while trying to retain as much of the language style as possible.

You don't have go to nearly as far as Japanese source material to find bad translations. One major point the guy makes in the short interview is that it shouldn't be noticeable that it is a translation. I don't know about other countries, but here in Germany, you only have to turn on your TV when there are American sitcoms on and you'll want to rip your ears off in this respect within minutes! It's unbelievable – you'd think English and German are not that far apart language-wise and that there should be enough competent professional translators available. But what happens? You get all sorts of nonsensical literal translations of sayings which don't exist in this way in German, so they make no sense at all, and sometimes even literal translations which suddenly take a completely different meaning from the original! It's very sad…

Ironically, one of the biggest problem with japanese translation are foreign words. I already commented this when I added Demon's Crest, where the original title is "Demon's Blazon", but due to the transcription system doing a direct translation it becomes "Demonzu Bureizoso". The problem is that in japanese the only possible syllables are vowels, a single consonant followed by a bowel or the sound "n".

It's what happened also with Metroid and the Barrier Suit, which became Varia Suit due to this translation problem.

But also Japanese is probably one of the most problematic languages, having two syllabaries and then the very complex kanji writing.

Still, you don't need to go so far. Things like genders or talking patterns can be a problem with Spanish translations, as in English everything is genderless and lacks things like the formal speaking (usted) or the archaic formal speaking (vos).

The second has a tendency on bad translations to be used for fantasy games, as people relate it to knights and such. It happens for example in Fable (the XboX game, not the graphical adventure), where you are a kid at the beginning, but talk to your father using such a formal form that it looks like you were talking to a king.

For the first I recall that when Prison Break was popular apparently there was a twist where somebody was being called "president", it resulted that this president was a woman which appeared on these scenes. Of course, in Spanish president has male and female forms ("presidente" and "presidenta"), so the twist was completely absurd, when everybody knew the mysterious president was a woman.

There are lots of things like that, I recall also one of the most badass phrases from unforgiven losing much of it's sense because there is no word containing all the meanings of crawl (there is one word for animal crawling, another for kid's crawling). But translators are prone to stomping on these things, and ironically sometimes their inventive solutions becomes as popular, or more, than the original phrase.