I just have one little thought to drop into the blogosphere discussion that's been going on about fanfiction. I've seen several people say, "It's okay as long as you aren't making any money off it."
I'm not sure that's the issue. People steal ebooks all the time and violate the author's copyright. When someone takes one of my books and posts it to a list with a thousand people on it, he or she isn't doing it to make money. In fact, people like that generally defend themselves by saying they're trying to save their friends money, or that everything on the Internet ought to be free anyway. (I'm not making this up-- this is what these people say. Honest.) But it's still a copyright violation and it loses me royalties every time someone does it.
So I think the question really is not whether the author of fanfiction makes money off writing fanfiction, but whether fanfiction causes the original author to LOSE money.
In the interest of full disclosure, I'll add that I have a two-hundred-page Star Trek: The Next Generation fanfic sitting on my hard drive. I thought about posting it to one of those sites a while back, but I eventually decided not to. As an ebook author, I think it behooves me to steer clear of any sort of copyright violation... I sure wish everyone would honor MY copyrights, so I don't feel right violating anyone else's. That being said, I do understand why people write fanfiction. For some people, it helps them develop their talents. Posting it to get other people's reaction is not unlike sending your stuff to critique partners-- it helps the author of fanfic see the flaws in his or her writing. And it probably actually drives sales in many cases, since it keeps interest in a cancelled show (like Star Trek: TNG) alive.
But it's still a copyright infringement, no matter how many excellent reasons you can come up with to do it. Like I said before, people who send out ebooks to groups have no trouble rationalizing their actions, either. It's easy to rationalize your way down a slippery slope, all the way to the bottom.