The American Reader has a nice article on fan faction by Suzanne Black. The article choose Sherlock Holms stories as its central example, noting that Conan Doyle's enigmatic sleuth inspired fan fiction from the beginning. It seems that Doyle himself approved of these efforts, "suggesting that those fan-critics had as much right to define Holmes' fictional universe as he did." And of course that particular pool keeps feeding gushers.
A small sample of SH fanfiction reveals the sheer variety. Popular sub-genres of fanfiction include crossover texts (“Holmes meets Dracula”), alternative universe, or “AU” (introducing characters to a new or fantastical setting), and gender-switching. The subgenre “femlock” features Holmes or Watson or both rewritten as female. Joan Watson, as the female incarnation of John, has become a popular trope, most recently incarnated by Lucy Liu on CBS’s new series Elementary. Most prominently, though, fanfiction focuses on erotic or romantic relationships, including “slash” content (non-canonical, often homosexual, relationships). For this reason, it is often depicted as a revolutionary and counter-cultural form of expression. Fanfiction.net, the largest online database of fanfiction, lists over 20,000 works relating to Sherlock alone. AO3, a newer online archive for fan works (texts, art, and audio), launched in 2009, lists over 18,000 works in “Sherlock Holmes and Related Fandoms,” which is its fifth most populated category and is growing rapidly. This conflation by AO3 of the adaptations of SH into one category hints at the intertextual interdependence of the stories and their adaptations.
A search on AO3 for the SH fan texts with the most hits supplies, on the first page: an epic AU romance between Holmes and Watson that recontextualizes them as actors in contemporary Los Angeles; an experimental, first person narrative from Holmes’ perspective about his feelings for Watson; a humorous, fluffy piece in which Holmes proposes marriage to Watson; an AU retelling of the Sherlock episode “The Great Game” in which Watson is psychic.