McQueary's graphic testimony Friday was given during a hearing to determine whether there was enough evidence to support charges against two school administrators who supposedly knew of the abuse but did little to stop it.
McQueary said he went to the locker room to pick up some recruiting tapes when he heard sounds coming from the shower, according to dispatches from the Morning Call, which is staffing the proceedings in the Pennsylvania courtroom.
FULL COVERAGE: Penn State sex-abuse scandal
McQueary said he was embarrassed because he instinctively knew something sexual was taking place. When he glanced into a nearby mirror, he saw Sandusky in the shower, standing behind the boy with his arms wrapped around the boy's waist. McQueary said he quickly looked away.
“I stepped back. I didn’t want to see anymore, to be frank with you,” he testified.
But he also realized he needed to look again to make sure he wasn't mistaken about something so serious. He saw that it was indeed Sandusky and a young boy, and McQueary said he assumed that anal intercourse was taking place.
They had turned so their bodies were both facing me. ... They looked directly in my eyes," he said. "Seeing that they were separated, I thought it was best that I leave the locker room."
He added that he felt "shocked" and "horrified" afterward.
"I was not thinking straight," he said, adding that he was "sure (the incident) was over" when he left.
But McQueary acknowledged he doesn't know what happened after leaving. He testified that he also never tried to find the boy.
McQueary, then a graduate assistant, said he called Paterno -- who was later fired in the wake of the scandal -- the morning after, telling him that he "saw Jerry with a young boy in the shower and it was extremely sexual in nature and I thought I needed to tell him about it."
McQueary testified that the former head coach was "shocked" and "saddened" upon hearing the allegation.
"He said, 'I need to think and tell some people about it.' "
But McQueary didn't meet with university officials to explain what he saw until more than a week after first informing Paterno, he testified.
Paterno also allegedly never tried to find the boy, said McQueary, who he added he can't be certain if he ever used the word "intercourse" when describing the alleged incident to the former head coach.
But McQueary added, "There's no question in my mind that I conveyed to (university officials) that I saw Jerry with a boy in the shower and that it was severe sexual acts going on and that it was wrong and over the line."
He further testified he did not alert police, saying that he instead told Curley and Schultz.
"In my mind, that is the police," McQueary said. "I want to make that clear."
When pressed about why he went to university officials and not police, McQueary said it was "because it was delicate in nature and I tried to use my best judgment."
Sandusky, who was Penn State's defensive coordinator when he retired in 1998, met his accusers through a youth charity he founded, the Second Mile. According to prosecutors, he would hug, tickle and wrestle with the boys before allegedly crossing the line and sexually abusing them.
In November, the summary of a grand jury report was released contending that Sandusky sexually abused the boys in the basement of his home, hotel rooms, a high school wrestling room and -- based on McQueary's account -- the locker room for Penn State's football team.
Sandusky lawyer says comments misconstrued
Sandusky waived his right to a preliminary hearing Tuesday in Centre County, a two-hour drive from Harrisburg. From the courthouse's steps, his attorney, Joseph Amendola, took shots at McQueary's credibility during a long talk with reporters.
He suggested that had McQueary told Paterno, Curley and Schultz that he had seen Sandusky raping a boy in the showers, they would have done more than order him to stop bringing Second Mile children on campus.
"If we destroy McQueary's credibility, then we put the credibility of all others involved into question," Amendola told reporters.
In its report, the grand jury found that McQueary was a credible witness after hearing all the testimony.
According to the grand jury's report, McQueary testified that as he walked into the locker room, he saw the lights were on and heard the showers running.
As he put his sneakers into his locker, McQueary looked into the shower and saw a naked boy, about 10, "with his hands up against the wall being subjected to anal sex by a naked Sandusky," the report said.
McQueary, an assistant football coach placed on administrative leave this fall amid the scandal, told the grand jury he was shocked, then noticed both Sandusky and the boy saw him. He left the building "distraught," according to the grand jury's report.
What McQueary told people next -- and whether he reported seeing the act of sodomy, as the grand jury says -- is what makes him a key witness in the perjury and failure-to-report case against Curley and Schultz.
McQueary first reported what he saw to his father, and told Paterno "what he had seen" the next day. The head coach himself testified to a grand jury that McQueary told him he saw Sandusky "fondling or doing something of a sexual nature."
His father, John McQueary, testified Friday that he followed up with Schultz, who "knew about it and something was being done."
Both Curley and Schultz deny that McQueary told them the boy had been raped in the showers, according to the grand jury's report. They said he spoke of "inappropriate" or "disturbing" contact that made him "uncomfortable."
Asked if McQueary reported seeing an act of sodomy, Curley responded, "Absolutely not," the grand jury reported.
Schultz testified that he recalled being told at a meeting that Sandusky "may have grabbed the boy's genitals while wrestling" and agreed it would be inappropriate sexual conduct between a man and a boy, the grand jury said. But he also testified that the allegations made were "not that serious" and that he and Curley "had no indication that a crime had occurred."
Neither man reported what they'd been told to local or campus police.
"The grand jury found that portions of the testimony provided by Curley and Schultz were not credible," the report said.
Curley, 57, is now on leave, and Schultz, 62, retired in the wake of the allegations. Days later, Penn State trustees ousted President Graham Spanier and Paterno amid criticism that they could and should have done more.
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