Mother-in-law Does It Watching Us

I became a fan of this site after this happened and I looked on the web for similar situations. My wife and I are 22 and live with her mother who was left the house after her divorce six years ago. She is 49, but is a very cool lady. We get along great and she has been very generous to me and my wife (obviously her daughter who she has always treated very well). The one thing her mom said when we moved in was that she didn't want us to lock our bedroom door. She said she never wanted to feel there was someplace in her own house where she "wasn't welcome." We of course didn't see it this way, privacy etc, but we didn't make an issue out of it. So we agreed and always left our bedroom door open, I was a little uncomfortable with this since her mom's bedroom was down the hall, but it didn't present any problems for many months. Anyhow, one night about two months ago my wife and I were having sex on our bed and all of a sudden her mom appeared in our room, sitting on an easy chair in the bedroom...just watching us. She scared the hell out of me when I saw her, it was totally out of the blue, a complete surprise to suddenly see her there while I was on top of her daughter, even though obviously she was my wife! Her mom could see I was embarrassed and uncomfortable and just kind of laughed and said "Don't be so shocked, we're really all family, just ignore me." (Yeah, right!!) I kept going in and out of my wife until we both came...and through it all, I couldn't help but notice that her mom was playing with herself under her robe...and I could see that she came too just seconds after we did.She got up from the chair and said "I guess that was good for ALL of us..." and left the room. my wife didn't see anything wrong with any of this, she just brushed it off and said "If that's what turns her on, who cares..it doesn't hurt us and it's kind of exciting." I didn't think so at first, but after a while I agreed with my wife. especially since her mom has been so good to us. After that night her mom began coming into our bedroom two or three nights a week to watch us if we were having sex. sometimes she would actually ASK us after dinner or after we finished watching tv together if we were going to "do it" tonight! One time she said "I think it would be fun to watch you both undress" and we let her come into our bedroom and watch us get ready to have sex. While we did it, she played with herself, sometimes coming two or three times. I have these tremendously mixed emotions about being terrifically aroused by the presence of her mom and yet being embarrassed that we're putting on a "show" for her to arouse her to masturbate herself..but my wife thinks "it's the least we can do to help make her happy."