A/N: Full disclosure, I do not, nor do I ever plan to, write fan-fiction. This is written as pure literary criticism. I have, it should be noted, read my fair share of fan-fiction.
Fan-fiction is, at its essence, the writing of a new edition to existing mythos or facts, a story within a story which simultaneously redresses grievances with the arc of a story and respects the universe these stories exist in. For beginning writers fan-fiction can be a good way to establish a tone for themselves and get their legs as a writer; however, the limitations of the author's world, when respected, can be stifling, and when not not respected can give an air of artificiality to a work. Fan-fiction is, then, viewing one author's world through another author's eyes, and the imposition of one author's vision on another author's story. This of course excludes "true-life" fan-fictions, which aren't fan-fiction in the classical sense but rather elaborate fantasies or base wish-fulfillment centered on celebrities. I do not, in principle, disapprove of fan-fiction, however I do find that the "true-life" fan-fictions tend not to be narratives in their on right (As some of the better classical fan-fictions are) but are rather almost without exception blatant and derivative idolization. I will be examining them in a later installment.
First of all, what defines fan-fiction? This would at first seem a simple question, but I would still like to set out basic guidelines for what I include in the category of classical fan-fiction; firstly, this excludes any fan-fiction based on characters who exist in actuality, this means no "true-life" fan-fictions; secondly, this categorization excludes stories that are merely set in another author's universe, but are written with new characters, histories, etc (These are tangential fan-fictions), which brings us to the third point: classical fan-fiction can most accurately be described as a story set in another author's universe, relying on that author's mythos, and whose principal characters are drawn from that author's stories. Now, if you have not done so already, and I assume you have, please familiarize yourself with the genre, and remember, no One Direction, no Justin Bieber. Paradise Lost is fair game, bonus points for naming the root work.
Familiarized? Good, now think about the actions of the main character(s) in the story, how do they match up with the character as portrayed in the canonical work (the original)? Chances are, unless it's an exceptionally loyal fan-fiction, at some point the character acted in some way or made some comment, or didn't do something, that seemed out of style for him/her. This isn't necessarily a sign of a bad story, that depends more on whether it's a good read independent of the canonical work, but is rather a sign that the author has decided, for reasons good or bad, that the narrative would be improved by this change. Pay attention, for a second, to the way the author decided to change the nature of the character. This is a signal, hidden, if you will, in the noise of the story, that indicates how the author would like to have changed the canonical work. These changes may be small or large, but these alterations to the personality and motivation of main characters are indicative of the authors particular preferences as regards characterization and motivation.
Now we have to move away from the details and look at the bigger picture: how does the nature of plot compare to that of the canonical work? For instance, when looking at a Harry Potter fan-fiction, you would initially expect a plot in keeping with the series, that is, primarily an adventure, with all other sub-plots secondary. However, if you have read any significant number of Harry Potter fan-fictions (which I did for the sake of this essay), you would realize that a good number of these are romantic fan-fictions, exploring relationships, both canonical and universe-defying, in much more depth than the series ever did. Based on this and several other similar instances I would postulate that classical fan-fiction is not, as I originally believed, pure tribute to a body of work, but rather a combination of this as well as an attempt to "fill in the gaps" or enhance the canonical body by developing facets of the universe, consistent or alternate, that the author neglected. One could, if one were inclined, learn a good deal about the author by examining which facets of the universe they chose to expand.
We have so far limited ourselves to examinations of what fan-fiction can tell us about the author, but now we must consider what the author stands to gain, or lose, by writing fan-fiction. First of all understand this, it is the essayists humble opinion that fan-fiction is not an end in itself, but rather a means to developing one's own style. With that established I would like to say this in favor of fan-fiction, never has there been a better method for an author to gain a sense of their own style while "borrowing" from another author's. This tandem development can be a positive and a negative, depending primarily on the effort the fan-author puts into their own development. For instance, a fan-fiction that draws heavily from the source material, but also diverges in certain key areas of plot or characterization is indicative of an author with a developing style, for whom writing fan-fiction is a worthy exercise in stylistic expression. On the other hand an author who adheres strictly to established canon and style would probably benefit from either diverging somewhat in their subsequent fan-fictions or writing original stories to better develop their own style. Likewise, an author whose work bears little or no resemblance to the canonical work probably has a well-enough developed style to start working on original stories. Wherever one falls on the spectrum, the goal of eventually writing one's own work must be paramount.
I would like to conclude the essay by saying this; whether fan-fiction is wholly derivative or wildly divergent, it is always, always a compliment payed to the author. Write so that your work may one day be worthy of the same.