One of the places where imagination can thrive in the modern world is in Fan Fiction. The idea of this is that a group of people who are mad keen on something - like Star Trek, Star Wars, Harry Potter, Tolkien, My Little Pony or indeed almost anything - will collaborate to write stories about this 'universe', post them online, and usually get them read and commented on.
(Another aspect is cross-over fictions, in which someone takes their favourite universes and combines them - for example Dr Who and My Little Pony.)
The number of such fictions online is absolutely staggering; and since there is no quality control, the average quality is of course poor - but the peak quality is as high as any other kind of fiction that gets written.
The point is that Fan Fiction can be a world of Imagination - in which a world that has been created by others can be repeated, extended, developed by readers for whom that world is real. Certainly, I would have been very keen to participate in a Fan Fiction community when I was in my teens and had discovered Tolkien.
Fan Fiction is surely one of the best aspects that characterize that (mostly good) phenomenon known as Geeks or Nerds .
So, I would regard this world and phenomenon as one of the hopes for the world; in the sense that individuals may strengthen their Imaginations through participation, creation, commentary in a large and active group which is probably not available otherwise. And then they will probably carry this through the rest of their lives, as a touchstone of possibilities.
Of course, the forces of darkness are in there too, trying to wreck this world-building with satire and mockery, or simply by dragging it down to sex, especially non-traditional sex (e.g. 'slash' fiction); and 'shipping' which refers to Fan Fiction type activities focused on relation-ships; which may be the same relationships as in the original work, may be speculative, and many be 'kinky in some way.
Shipping can be funny and clever, up to a point - trying to Imagine how certain relationships came to happen, what would happen in them etc; but in general it is a trivialization and a stripping away of Imagination - it is taking something special and good, and removing everything about it which gives quality and distinction; to reduce it to the mass media level of celebrity gossip, or the 'recreational fiction' level of passing time in some diverting fashion.
So, to take Lord of the Rings and write up the Aragorn-Arwen romance has a strong tendency to miss the whole point of the book - to miss what it is that makes Tolkien's world worth writing-about in the first place - and when it starts being about Aragorn and Legolas then this has tipped over into subversion, and an attempt to ruin Tolkien's world, to make it something else which is not Tolkien and much less.
Likewise Harry Potter. As the books were being written and serially published, a large and vigorous 'Shipping' community arose to speculate on whom Hermione would end-up-with - Harry versus Ron (or someone else).
Of course this could be harmless diversion, but if persisted-in for long it must have the effect of utterly missing the point of what the Harry Potter books are about - and I think it had exactly that effect on many people. After not very long, the Shipping becomes a matter of mathematical permutation, and exercise in shock, a tearing-down not a building-up.
It is, in fact, a species of Hijacking - it takes a community doing one thing, and by exploiting inter-personal ties, points it at another thing altogether.
Instead of being Imaginatively enriched by these remarkable books, and developing a secret, vivid and real world of the mind; a mutually-stimulating community (indeed many communities) was created which simply 'used' Harry Potter as a disposable but convenient tool to pursue interests which are part of the mainstream mass media.
I actually saw this happen on a major blog called The Leaky Cauldron, which reduced the books by conflation with the much lesser and lower world of the movies; reduced the movies to show-biz gossip about the actors; and then successfully hijacked this community by enlisted them in the political campaign to 'redefine marriage' and extend the sexual revolution.
I have seldom encountered a more extreme and clear (and successful) example of the New Left tactic of cultural and institutional infiltration, subversion and takeover.
Anyway, and despite all of this; the world of Fan Fiction should not be neglected in terms of its great good potential and achievement. In a mainstream culture which offers nothing for Imagination to work upon; Fan Fictions may start with an appealing, magical, meaningful world (from novels, movies, TV, comics, video games etc) and keep a person's Imagination alive, make it stronger, and even grow it.
In sum: The importance of Fan Fiction is that, while very few people can (like Tolkien, Rowling etc) primarily create a meaningful, purposeful, participative Imaginative Universe - a much larger number of people can take such a universe and secondarily create within it; can incrementally extrapolate, interpolate, combine it with other such Universes, deepen and extend characters from it, make new plots using characters from it - and so forth.
Even tertiary participation - via reading and discussion of Fan Fictions - can be a creative activity; comparable to writing essays or participating in seminars. But better than most essays and seminars; in the sense that Fan Fiction is (mostly) amateur and done for love and from self-motivation; while most essays and seminars are professional and done to get educational credits and in obedience to external pressures.
Since this secondary creativity is typically done within a better 'world' than the self-hating mainstream secular-alienated-nihilistic world of modern public discourse; and since the world of Fan Fiction is a part of a person's life; this can serve to make a person's life more meaningful - which is to say Fan Fiction can make a person's life not just better but deeply better. And it has done, for very large numbers of people.
Not a trivial achievement!