Touhou has one of the fastest growing fanbase in Japan. It's one of the more popular bullet-hell games, and coined the term
danmaku shooter. To quote anon: "Even the bullets shoot bullets!" (this is not true, but you get the idea). It's produced by Team Shanghai Alice, which in reality is a one-man studio.

Part of why it grows so fast is because of its semi-
C.C.-like licensing. Basically you can make any form of derivative work from the games as long as you:
- Credit ZUN as the original creator
- Do not claim it as an official work
- are not making it for commercial mass production
And the rule also applies to the derived work. Sorta like GNU-GPL in a way I guess.
In short, it gives
doujinkas a heckuva leeway. Not just for
mangakas mind you, but for amateur game makers
and musicians as well. So you are able to make use of existing material to sell to an existing fanbase that would in turn help expand the vibrancy of that fanbase and attract more people to the series.
Anyway, the
incredibly large roster of characters has developed the need for canon and
fanon. Touhou is one of the few trends where usage of fanon is widely accepted (other non-Touhou examples would probably be like the gender-bended Haruhi Suzumiya version of Kyonko's design for example).
Let's take one character,
Cirno as a sample. In canon she's some ice fairy who first appeared as a stage boss in the sixth game.
( Long blablabla (with videos!) Not for the time-impaired )↓
The melancholy of that song haunts me to do a pic from one of the poignant moments in the vid.

If I were just to say it was a fan-art of Cirno, it wouldn't make much sense. Thus all that trivial stuff beforehand is necessary to explain the progression. Hope you guys now appreciate as to how Touhou really works. :)