Teresa Nielsen Hayden, an editor at Tor Books, sticks up for fan fiction:
In a purely literary sense, fanfic doesn't exist. There is only fiction. Fanfic is a legal category created by the modern system of trademarks and copyrights. Putting that label on a work of fiction says nothing about its quality, its creativity, or the intent of the writer who created it.
The Pulitzer Prize for Fiction this year went to March, a novel by Geraldine Brooks, published by Viking. It's a re-imagining of the life of the father of the four March girls in Louisa May Alcott's Little Women. Can you see a particle of difference between that and a work of declared fanfiction? I can't. I can only see two differences: first, Louisa May Alcott is out of copyright; and second, Louisa May Alcott, Geraldine Brooks, and Viking are dreadfully respectable.
For Reason's reports on the fan-fiction world, go here, here, here, and (just a cameo, but it's a juicy one) here. To see a Reason writer producing fanfic of her own, go here. And of course, I can't mention fan fiction without linking to the Roy Orbison In Clingfilm site, without which the universe would be a much drearier place.