It is literally what it says it is. Content that is created by the consumers of the product.
For example:
Minecraft, Custom Maps/Mods
Little Big Planet.
Portal 2 Custom Maps (PC Only)
Skyrim Mods (PC Only)
Benefits:
Free and easy to get.
Increases amount content by a practically limitless amount
Some content if popular can increase sales of certain titles. E.G. the DAY-Z Mod for AMMA 2, increased sales of the game dramatically.
Cons:
Developers may stop making DLC because they wont make money.
Some content will be incredibly low quality.
Not all games would be suitable for UGC. Games like Uncharted and Assassin's Creed are heavily story based and therefore it would not be appropriate to add content.
Some UGC may cause controversy E.G. The Hot Coffee Mod
The Best Place to find examples of UGC is the Steam Workshop on the PC, or the Minecraft Forums for Minecraft Mods.
UGC is most likely here to stay as we have seen these market grow over the years and it will no doubt keep growing.

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