A group of regulations and tests within the field of copyright law that  focus on 
the ability to use another party's copyrighted material. 

Fair Use VS Plagiarism
The fair use doctrine should not to be confused with the idea of plagiarism.
While fair use is a legal concept, plagiarism a more focused on the
ethics of behavior. It is possible to violate fair use without plagiarizing, and
vice versa.

Testing for Fair Use
Whether a situation is fair use is tested by the "four factor test." The four factors
are purpose, nature, amount, and effect.

(1) The purpose if using copyrighted material is the first test. (Example: whether
the use was commercial or educational. )

(2) The nature of the copyrighted item. Whether or not an item is factual is a factor.
Certain materials, while copyrighted, may hold significance as a piece of history
such as the time the Zapruder film JFK's assassination was allowed to used in
be used in a book. (see wikipedia link under  "Nature of Copied Work")

(3) The amount and significance of the part of the copyrighted material used as
compared to the whole. It is important to notice that it is not always the amount
that is important. If a small section were able to capture the meaning of the whole
piece, it would still be a violation of fair use.

(4)The effect on the market value of the potential work.

There are no strict guidelines for cases about fair use. All four factors are considered
as a whole when judging the situation. Fair use is a legal defense. This means that
the owner of the copyrighted material must first show that impact of the damages
caused. Issues like this are most easily avoided if the copyright owners were contacted
before use of their work.  

Impact of Fair Use
A study has found that fair use dependent industries account for  18% of US economic
growth and 11 million jobs. There is a substantial sum of money involved because of
this exception to copyright law. However, some people do think that it ends up defending
privately owned work more than ones with public domain. 

Parodies
Parodies of copyrighted material often cause lawsuits. In general, courts have allowed
the fair use defense. Parodies in this sense apply to situations directly commenting on
the copyrighted work. If the someone were to use copyrighted characters to comment
on a third party, it may not be successful as an issue of fair use. 

Fair Use VS Illegal File-sharing
Lately there have been many issues with peer-to-peer transfer, especially with the
lawsuits made by the RIAA. In one of the newest cases, the case against
Joel Tenenbaum, a Harvard Professor is trying to defend with the idea that the
copying of music has no monetary incentive. His explanation is here.

Fair Use Online
Linking of files are not considered a violation of copyright at certain times. In one
instance, Kelly v. Arriba Soft Corporation, a court said it was still legal to link
thumbnails of published works for a search engine. In using the four factor test,
the courts determined that while it was a creative work (which usually has more
copyright defense) it did not have real negative consequences to the plaintiff.

Another decision about publishing material using copyrighted work, such as videos
on youtube, has stated that the copyright holders can't ask for the immediate deletion
of the file without considering fair use.
 
Short guide to applying fair use
Wikipedia Entry