Alternative Universe is a form of fan fiction where writers like to explore the possibilities of pivotal changes made to characters' history, motivations or environment.
The author gets an established audience for their story: The fans of
the original, and then subsequently altered, universe, which they would
not get if they wrote it as an original story instead of fan fiction. Some examples are: Babylon 5 or the Harry Potter Story, "A Moth to the Fire," where Ariana Dumbledore does not go out to play on the day she is attacked by muggle children in canon so she does not lose control of her magic which alters the life of her brother and eventually the entire world.
This is used for fan fiction where canonical non-human characters are depicted as human. For instance, if the animals in Narnia were all humans. Usually in such cases the characters retain their names and personality, despite the change in species.
The author gets an established audience for their story: The fans of
the original, and then subsequently altered, universe, which they would
not get if they wrote it as an original story instead of fan fiction. Some examples are: Babylon 5 or the Harry Potter Story, "A Moth to the Fire," where Ariana Dumbledore does not go out to play on the day she is attacked by muggle children in canon so she does not lose control of her magic which alters the life of her brother and eventually the entire world.
This is used for fan fiction where canonical non-human characters are depicted as human. For instance, if the animals in Narnia were all humans. Usually in such cases the characters retain their names and personality, despite the change in species.