In my encounters w/ law enforcement, when I mentioned the word geocaching, I found that they were already familiar with the sport and were cool about the whole thing.
I agree that people do get crazy sometimes. Once I went on my lunch break (read: broad daylight) with my white, long-sleeved shirt, tie, and name badge on, to get a cache that was a mild walk on a trail which just happened to be adjacent to a school parking lot.
When my buddy and I were leaving the site, we were met by a waiting police officer. He was standing beside a stern-faced lady, who was obviously a teacher or administrator at the school that notified the police.
He asked what we were doing there, we told him geocaching, he was familiar with it, and that was pretty much the end of the discussion. Yes, siree, I can see how that lady thought two, middle-aged, men in dress clothes posed a serious terrorist threat to the school campus!!! Ridiculous!! Besides, it was a public trail not on school property. Gimme a break!!
There's no need to ban micros from parking lots either. If I see signage, or other evidence, of a trespassing prohibition, I comply. I don't hide nor do I hunt in those spots! I imagine the vast majority of our caching colleagues do likewise!!