Demo Editing is a term used to describe the modifying of a games demo file. Typically, the modified demo file is then used to produce user-generated screenshots or movies (Machinima) of events and situations which did not actually take place during live game play. A recorded demo is usually saved as a text file, rather than a standard video file, containing all the commands required to instruct the game engine how to play back the recorded demo. All of this information (usually) can be edited, changed, deleted, or added to (or even created from scratch), requiring, at its simplest, only a text editor and a reasonable understanding of the demo file code. This allows for the creation of custom screenshots, comics, and movies via Demo Editing with relative ease.
Demo Editing may be used to strictly refer to just the modification or creation of a custom demo file, or it can be more broadly used to refer to both the editing of a custom demo file and the playback, capture, and production of a modified demo into movies and/or screenshots. The contents section below contains further details about how to edit demo files.
Most MMOs have the a demo file system although not all games allow user access.
City of Heroes
City of Heroes has one of the most editable demo systems. They can be made from scratch or recorded and then edited later. For more information on City of Heroes demo editing, see CoH Demo Editing and/or Paragonwiki's entries: http://paragonwiki.com/wiki/Demo_Editing
Champions online has demo editing capabilities. For more information, see this Champion's forum thread: http://co-forum.perfectworld.com/showthread.php?t=100884