Fair use refers to the copying or reproduction of copyright materials for limited "transformative" purposes without obtaining permission from the owner of the copyright. It is a gray area so proceed through it with caution.
There are two categories of use-commentary or criticism and parody. Commentary/criticism allows for a small amount of copyrighted material to be copied to achieve the purposes of the work. For example, if you're writing a book review, you are allowed to quote small amounts from the book to make the review plausible.
Parody allows for a fairly extensive use of the original in order to set a stage or provide context for the parody. In other words, how much of the work is necessary to make the parody make sense?
The only definitive answers in fair use disputes are through federal court rulings.
Judges usually consider four factors in determining fair use.
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Purpose - is it a parody or criticism?
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Nature - is it published or unpublished? Recent decisions indicate that there is more leeway if the material is factual and published than not.
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Amount and substantiality - the less of the original used, the better unless what is taken is the heart of the work then no matter how small an amount, fair use would not apply
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Effect of the use upon the potential market-does the use deprive the copyright owner of income or does it undermine a new potential market for the owner or work?
When in doubt, always seek legal counsel and obtain permission from the copyright owner.
