Authorities say police investigating Susan Powell's disappearance came across thousands of images of women videotaped without their knowledge, some of his daughter-in-law.
The 61-year-old pleaded not guilty on Friday in Superior Court. A judge has set bail at $200,000.
Steven Powell is the father of Josh Powell, Susan's husband, who is the only named person of interest in his wife's 2009 disappearance.
Josh Powell has never been arrested or charged in the case. The two live together in Washington.
Following Steven Powell's arrest, a lawyer for Susan Powell's father said he's filing a motion in court in Tacoma for her father, Chuck Cox, to take custody of her two young children.
The children had been living with Josh Powell at Steven Powell's home in Puyallup.
Josh Powell told police he took his two young children camping on the night his wife vanished.
Authorities spent the last 10 days searching a remote central Utah desert about 30 miles from where Josh Powell claimed he went camping. At one point, they said they found a "shallow grave" after cadaver dogs alerted them to the spot, but they later found no human remains.
Steve Powell claimed on "Good Morning America" in August that he had a flirtatious relationship with his daughter-in-law. He said they were falling in love and even implied a sexual relationship had occurred.
"Susan was very sexual with me," Steve Powell said. "We interacted in a lot of sexual ways because Susan enjoys doing that."
Her parents adamantly denied Steve Powell's claims, saying Steve Powell initiated unwanted sexual advances toward her.
The Associated Press contributed to this report.