Okay, so, my history with this game is...well, unfortunately short.
I started hearing about it when delving into OSR blogs. Typically by encountering reviews discussing the controversy surrounded it. Like this one. Or this one (also available on RPG.net).
For those who don't know, Supplement V: Carcosa by Geoffrey McKinney was released a few years back. It was touted as a supplement to the 1974-edition D&D, and was written with that fact in mind. It was available at Geoffrey McKinney's blog, but by the time I heard about it and went looking for it, that was a dead link (I now suspect that this occurred because he was in talks with James Raggi to get the thing published).
After looking around for it with no luck for a few months, I saw that Lamentations of the Flame Princess was going to publish it.
With my problem solved, this was one of the few products I actually awaited and ordered on release date (strangely, the other was another LotFP product, Vornheim, which I pre-ordered the day pre-orders went live; I've yet to get my hands on Weird Fantasy Role-Playing, but I plan on picking it up, and I expect damn good things).
Anyway, Carcosa details a fantasy setting taking place, well, on the world of Carcosa (you know, where Hastur lives), a setting combining sword-and-sorcery fantasy, Lovecraftian horror, and the typical weirdness of Erich von Däniken and Giorgio A. Tsoukalos (himself a Delta Green friendly). Horrible entities stalk the empty wastes, and humanity is a cosmic accident (we were actually bred as a slave race for the Snake-Men).
As for player races, there are only humans. Humans are weird, though; there are thirteen human races, and these aren't ethnicities, these are actual species, although this does not alter their game statistics in any way. Each race has dark hair, dark eyes, and skin entirely the color for which they are known (Blue Men are as blue as the sky, Green Men are green as grass, Bone Men have transparent skin and hair, Black Men have skin black as pitch, etc.). In addition to the typical colors, there are three additional colors on Carcosa, and a race of man for each.
There are rumors and superstitions about the different breeds of men. They do not trust each other as a rule.
The number of classes is reduced to two: Fighting-Men, and a new class called "Sorcerers." Sorcerers are basically Fighting-Men who can learn spells. Unlike typical D&D, they start with no spells, instead learning them in their travels. Also unlike typical D&D, spells are rather unfortunate beasts. With the exception of dismissal spells, all spells are horrible and should never be cast by anyone. They take a long time to cast, require exotic components, and will almost uniformly mark the caster as a bad space person.
So, if magic is primarily evil and everything is trying to kill us, how has humanity survived? Simple: they scrounge the technological detritus of the Space Aliens (basically Greys, by description), using these items to bring the fight to the Old Ones. These items essentially replace magic items, leading to a setting where loincloth-clad men with bone weapons also have plasma cannons. As noted in Carcosa, this reliance has stunted humanity's growth; it is far easier to steal advanced technology than invent some.
The game has some other little neat things that make it worthwhile: tables for random spawn of Shub-Niggurath, random robots, and random alien artifacts. One of my particular favorites is the random hit dice/damage mechanic. It slows combat a fraction, but makes combat completely uncertain. Characters have set numbers of hit dice and set numbers of damage dice. However, the die type and value is randomly determined. Those bandits might just have one hit die, but are you facing down d4 bandits or d12 bandits? Does each one have 1 hp or 12 hp? Are they swinging with d4s or d12s when they hit? What about that monster with 10 HD? Is that 10d12 HD, or 10d8 HD, or 10d4 HD?
Do you want to risk getting into a fight with him to find out?
All-in-all, Carcosa is a fully-detailed sandbox setting, and probably has neat stuff no matter what you play. For example, you could totally use some of the monsters, spells, artifacts, and random charts in any game (retroclones require the least translation, of course), with some modification. If you play oD&D, though, this game is truly an inheritor to the title — it combines gonzo, pulp adventure (Conan steals a fusion rifle from the Grays and kicks ass) with pulp horror (sadly, a fusion rifle doesn't protect you from saying, "Hastur") in proportions to do Gygax and Arneson proud.
After all that, I should probably address the controversy about the book. This is a game of brutal, violent combat, and morally grey people doing morally grey things to other people likely worse than they.
Carcosa is ultraviolent.
People had problems with the graphic violence of the game. The article at the beginning of this post notes the most egregious example, that of the spell Summon the Amphibious Ones. The ritual component for the spell involves coitus with an eleven-year-old virginal girl, followed by her murder.
I completely understand why that's offensive. In fact, if you find that offensive, congratulations, you're not a sociopath.
However, I also think that gaming is probably one of the better places to explore these themes, as the environment is "safe." (We'll ignore all the horror stories about people with bad roleplaying experiences regarding this sort of thing, and briefly assume that we're roleplaying among people we know and trust.) Granted, a lot of people don't want to explore heavy themes in RPGs because they don't find that fun. That's fine (and again probably puts a check somewhere in the "not a sociopath" column of your chart). But I don't necessarily think it's monstrous to include it, particularly if done with an eye toward the subject matter.
Which leads me to the second point: sorcerers are bad people. This was a deliberate choice by the author; sword-and-sorcery sorcerers are almost always bad, and if they aren't, they're still somehow wrong (even if Solomon Kane accepted him, N'Longa was still creepy as all hell). Nobody is stopping a character from playing a sorcerer, but the heights of power are only reserved for those who are willing to sacrifice their humanity. Sure, you can do this awesome thing, but is it worth it?
The question of character responsibility is always appropriate, in gaming or elsewhere.
Basically, this isn't FATAL. Horrible things aren't included to indulge in a twisted power fantasy, but instead to balance power with consequences.
So that's that. If you have anything that really bothers you, you probably shouldn't read it (or look around on the internets to see what people are saying about it, and make a choice based on some other reviews). If you like your gaming to be light-hearted fun, you likely won't like it (though maybe you'll find something you do like, such as the random robot tables). If you want some gonzo ridiculousness with a little sanity-blasting horrible, you'd probably like it.
Consider it added to one of the many things I'd love to run someday.
A Word on pdf Layout: While waiting with baited breath for the print version (and the map!), I've been looking at the pdf. It's a gorgeous beast. The monsters, spells, and map hexes are all keyed together, so that if Summon Atrocious Beast summons the Atrocious Beast from the Well of Generic Pulp Awfulness in Hex 666, links will take you to all these places. I typically don't like to read pdfs, but this one is pretty friendly.
A Little 4e Note: I'm currently playing 4e, so my awareness is geared toward 4e. This RPG.net post asks about porting Carcosa 4e. For the record, I agree with the author's conclusion: limit characters to Martial types (maybe Psionic types, too?) and only allow magic through the Ritual Caster Feat. Mess with the rituals to match spells in Carcosa, cutting out the generic component types and replacing them with specific components from Carcosa spells. I'd be inclined to respond to the post if I didn't have to go through the rigamarole of signing up for RPG.net, so chronoplasm, this one's for you.