[QUOTE=DravenX]Where do fan made games fit in?. Are they also violating certain copyright laws if it's a fan made game?.[/QUOTE]
Yes they are.
[QUOTE=DravenX]How strict are these laws exactly?.There's 1000's off mario , rockman etc clones out there and i don't see them being deleted from certain websites.[/QUOTE]
Just that you don't see it happen doesn't mean it never happens.
It's never a clear cut case. Most fan made games are pretty bad, and for the IP holders most of them don't enter into the IP holders signal to noise ratio. The two most common causes for a fanmade game to be C&D'd are a) if they are actively making money off the project, or b) the quality of the game is sufficient enough as to detract from sales of proper releases.
Nintendo has shot down quite a few fan projects. The most memorable for me being the Ocarina of Time de-make, where a guy was recreating Ocarina of Time using A Link to the Past assets.
However, copyright (like trademarks and patents) is something that the holders must actively enforce themselves. Simply put, the reason you see so many games that do not get taken down is because there are so many games that people make. It's not feasible to C&D each and every one.
In some cases, though, an IP holder can actually encourage fanmade material, as it generates good-will. AFAIK Lucas Arts have been pretty openminded about fanmade material (though Disney is quite the opposite. I wonder which way this issue will tilt with Disney at the reins).
Hasbro is also pretty openminded about fanmade material for MLP:FiM, for instance, but not without limits. They haven't done anything against Fighting is Magic, but the fanmade Magic: The Gathering MLP set was C&D not too long ago.
Edit: What is this, the fifth or tenth time this discussion has come up? inkBot2012-11-04 22:29:00