Installation 01 is a fan made Halo game being made for PC. What happens with fan made games is usually they get started and then when they get big enough the creators hear about them and then they get shut down. Yesterday 343 told them that it was okay to go ahead and keep working on the game.
The team behind the fan game have been in contact with 343 to talk about Installation 01's legality. In their most recent post here they talk about their discussion with 343. They are not under imminent threat of legal action, and as long as they avoid a couple things they should be able to steer clear of any trouble and see the project through to the end.
Installation 01 falls under Microsoft's game content usage rules. That means that as long as they don't sell the game (or products based off the game), or even accept any kind of money for their work they'll be able to keep working. So, since they want to see this project through to the end, the project manager of Installation 01 announced that they would not accept any donations or any money for anything related to the game.
As long as they keep to that you can expect to see this project keep building until there's an homage to the classic halo combat system out there for free. What are your thoughts? Do you think Microsoft and 343 are handling this a lot better than other companies do? let me know by tweeting me @spencerhavens.