From Sonic Retro
Fan games are computer and video games created by fans of things such as a popular televison shows, fictional stories, or established video games. As the name suggests, these games do not tend to be endorsed by the official holder of the licensed property, so in the case of Sonic fangames, neither Sega nor Sonic Team has typically had a role in the game's development cycle - they are primarily made by the fans for the fans, much like fan art or fan fiction.
Fangames based on the Sonic the Hedgehog series are well established, with the first "modern" fangame, Sonic Boom hitting the internet in 1995. They are still very much a hobbyist movement, produced by "bedroom programmers" in their spare time. As technology has progressed, fangames have evolved, with many noted for surpassing the official products in terms of quality. Sonic the Hedgehog 4, for example, has been put side-by-side against Sonic Fan Remix in many gaming publications, with some people ruling in favour of the latter.
Fan games are typically either developed as standalone games with their own engines, or as modifications to existing games that "piggyback" on the other's engines. Each approach has different advantages, as standalone games are generally accessible to larger audiences but may often be more difficult or time-consuming to develop.
Because fan games are developed with a relatively low budget, they are rarely available on a console system; licensing fees are often too prohibitive for fan games, even if the game is made with original content. However, homebrew fan games can occasionally make it onto consoles with prolific homebrew gaming, such as the Sega Dreamcast, PlayStation Portable and Game Boy Advance.
It is also argued that if the user has the skills to create a fully functioning fangame that directly mimicks the official product, their skills could be put to better use in producing an entirely original game that can then be sold without troubles.
Generally, fan games are developed using pre-existing tools and game engines. The Unity engine and Macromedia Flash allow fans to develop standalone games, as do other programs such as Game Maker or any of the Clickteam products (such as The Games Factory and Multimedia Fusion).
Fan game developers often select and use free and open source game engines (such as OGRE, Crystal Space and DarkPlaces) to help create games without the cost of licensing a commercial alternative. These engines may be altered and redesigned within the terms of their open source license but often do not allow developers to easily create high-end visual effects without additional effort.
It is also possible for fans to develop original game engines from scratch using a programming language such as C++, although doing so takes much more time and technical ability than using an existing game engine.
Modifications to existing games
Fan games are sometimes developed as a modification to an existing game, using features and software provided by many game engines. Mods usually do not modify the original story and game graphics, but rather extend the current content that was provided by the original developer.
Because of the complexity of developing an entirely new game, fangames are often made using pre-existing tools that either came with the original game, or are readily available elsewhere. Certain games, such as Unreal Tournament 2004 and Neverwinter Nights, come with map-editing and scripting tools to allow fans to develop mods using the engine provided with the original game. Games such as Doom are old enough that their source code has been released, allowing radical changes to take place. A prime example of this is Sonic Robo Blast 2 which was built on a modified Doom engine.
Famous fan mods (for example, Counter-Strike and Day of Defeat) may even be adopted by the game developer and made into an official addition to the existing game (Half-Life).
Despite the well intention and dedication of these fans, development of many fan games ended in abandonment. Besides the possible legal issues that can derail fan games numerous other development challenges are possible when attempting to develop a fan game from start to finish. These challanges can be due to the lack of development experience, time, resource, money, interest, talents, and other factors.
Excluding mods (which are technically not true fan games), the vast majority of fan games that have been successfully completed and released are adventure games. This is likely due to the longer history of this genre and the ease of creating such games, which often are not as complicated as other genres which need extensive balancing such as the RPG genre. There is also a larger availability of many free third-party tools or engines to make these games. Most importantly, an unwavering passion is needed to overcome various obstacles encountered during the project's development. This sacrifice is best described by Britney Brimhall of AGD Interactive, regarding their 2001 remake of King's Quest I, "I think a lot of people don’t realize when they initiate a game project just how much sacrifice it will require. Whereas most people enjoy writing a story or making a piece of artwork, most would not enjoy writing hundreds of pages of dialogue or drawing over one hundred pictures when they could be socializing with friends or playing video games."
Some companies go out of their way to shut down fan games and related projects, declaring them copyright infringements. In the vast majority of cases, the original copyright holders have full legal justification to order a cease and desist, as by law in most countries, fan games are considered derivative works, and as such are unauthorized uses of copyrighted property.
A notable case in late 2005 involved Vivendi Universal shutting down a King's Quest fan project, King's Quest IX: Every Cloak Has a Silver Lining. It was to be an unofficial sequel granting closure to the series, which had been abandoned since 1998. After a letter-writing campaign and fan protests, Vivendi eventually reversed its decision and allowed development of the game to continue. As part of the negotiations, the developers were required to remove "King's Quest" from the title.
Very few companies have ever officially made comments on fangaming, however. Other times, companies have endorsed fan games. This is seen through a Myst fan game, called The Ages of Ilathid, where Cyan Worlds, the original creators of Myst, had acually given permission to the creators of the fan game to use the Myst name.  Most companies that don't outwardly promote or challenge fan games have in the past exacted a de facto policy of non-involvement or neutrality, officially stating that their copyrighted material may not be used without permission, but refusing to prosecute fangamers for doing so, in much the same way as fanfiction is tolerated. Sega has never interfered with the production of Sonic-based fan games.
Notable Sonic fangames
In alphabetical order