It's true, speaking from experience. Both Amazon and the sex toy sellers are aware that most people would want those packages to be discrete.

That made me think: if Amazon is putting these products directly in the locker, do they even need to wrap it in packaging? It surely would save them money and time, although then it's more checking on the part of the guy loading things into the lockers.

I'm not sure it would save them money. Packaging all the various stuff (in various shapes!) uniformly greatly streamlines the shipping process. It makes the stuff easier to store (in warehouses and during shipping) and handle. Bar-codes/RFID's can also be placed conveniently to speed-up handling.

Good point, their order assembly is pretty automated and this would be a huge change to that.