Newsweek magazine this week joined the unlikely ranks of Playboy, Penthouse, Hustler, et al., by being banned outright in some outlets and having its cover partially obscured in others.

The cause of all this commotion is artist William Bailey's "Portrait of S," an oil painting of a woman nude to the waist reproduced on the cover of the weekly's 3 million copies.

In Washington, the June 7 issue of Newsweek has been pulled from the racks of all 131 Giant supermarkets. Safeway stores have left the decision to the discretion of individual managers. And Washington newsstands are coping with the issue in various ways, often by covering a portion of the cover with a piece of paper or cardboard, a technique often used on skin magazines.

Around the nation, the policy at the 2,400 Safeway stores is the same as in Washington. The Winn-Dixie and Albertson's grocery chains are not selling the issue. And in Sarasota, Fla., a magazine wholesaler has applied gum-backed pasties to the woman's breasts.

Newsweek public affairs director Avery Hunt said yesterday that newsstand sales of the issue, whose cover story is about the revival of realism in art, are twice normal in New York City. Hunt said the magazine had received "about a dozen phone calls" protesting the cover and that "one or two of the callers wanted their subscriptions canceled."

"I thought this was 1982," said Newsweek editor Lester Bernstein. "This just tells you that there are a lot more people around who haven't been inside a museum than you might suspect. I expected that there might be some objections, but I felt that it was a beautiful painting illustrating a distinguished article of art criticism. Any different view of it is in the eye of the beholder."

Katharine Graham, chairman of the board of The Washington Post Co., which publishes Newsweek, said yesterday, "I really don't want to talk about it."

William Bailey, the 51-year-old Yale University painting instructor who created the portrait used as the cover, said yesterday, "I have mixed feelings about all this and I'm beginning to have more and more regrets. I don't know that the cover of a national newsmagazine is the place to display paintings. One feels very vulnerable in this position.

"Paintings are very private things. My figure painting is done primarily out of my head. This is not a real person; it's a painting, a vision from my head. I think there's an entirely different aura created when a person views a figure painting in a museum than when it's seen on the cover of a magazine.

"I heard about this man in Florida putting white pieces of tape over the breasts. That's disgusting to me as an artist. The same issue of the magazine has a picture on the people page of a woman Pia Zadora in a bathing suit which is salacious. That's not what my painting is about."

"At first glance, William Bailey's 'Portrait of S' quickens the eye," Mark Stevens wrote in the opening paragraph of his cover story. "Nudes usually do, which is one reason why artists paint them. Mere nakedness soon loses its power, however, so this portrait must enchant in other ways. It does--in its rhythms of form, color and light; in the surprising manner in which the artist has rhymed triangular shapes; in the beguiling way he has formed her hair, so that it seems both lively and contained."

"There's absolutely nothing erotic or pornographic about it," said Bernstein.

"We are a family-oriented business," said Barry Scher, director of public affairs for Giant Food. "We felt this might be offensive to some of our customers."

"I'm sure the cover was chosen solely to appeal to the artistic depths and interests of the nation and that Newsweek had no interest at all in its prurient appeal," said Cal Thomas, spokesman for the Moral Majority. "Now, if you believe that, I've got a bridge in New York I'd like to sell you."

"We've got the magazine on display," said Alisa Martin, a spokesman for the Southland Corp., which operates 7,000 7-Eleven stores in the United States.

"Terrible. Awful. This is a newsmagazine, not Penthouse or Playboy," said Ilias Zizi, newsstand concession holder at the Madison Hotel, who has the cover of the magazine obscured from the neck down.

"There have been no complaints in the Consumer Advocate's Office or at the Washington, D.C., post office," said Jean O'Neil, a spokesman for the U.S. Postal Service, which delivers 2.8 million copies of Newsweek to subscribers each week.

"It's the goddamnedest thing I've ever heard of," said Bernstein. "This whole thing'll probably be the subject of some dissertations in social psychology a year from now."