Hmm, see, I don't know much about copyrighting, but I'm being told that I should not make a non-commercial Mario game due to copyright issues? I don't see what's wrong here, I'm not making any off it, and there are plenty of games based on copyrighted stuff, like ESF (DragonBall Z Half-Life mod), and there are a lot more but naming them all wouldn't help any, so I'm just here to know why this would be a bad idea.

Here is a classic thread dealing with copyright issues.

Referenced in the above thread, here is another thread about copyright where I ask my lawyer specific questions on this issue.

Bottom line: Nintendo owns the copyright to Mario. They are the only ones who can give permission for anyone to do anything with it. Non-profit, fan site, doesn't matter... copyright is clear on this issue. You can view the US governments FAQ on copyright for more info.

Okay, so basically it just comes down to if Nintendo has a problem with it?

Absolutely. There is no "copyright" police and if Nintendo has no problem with this, have at it! Just make SURE that they don't have a problem with it, right?

So it's not about prison or not. To me...

...it's about respect: Nintendo spent the time and money to make Mario a popular character that everyone recognizes. I feel it's a lack of respect to use him merely so YOU can get recognized and essentially ride on Nintendos coat-tails.

...it's about originality: I feel that if you have to use a Mario character, it shows to everyone that you don't have the originality to make your own character or, at the very least, to modify Mario into something original (even if derivative work is still a copyright violation, this is less problematic than a carbon copy).

...it's about exposure: If you get a lot of exposure from your work and actually draw the attention of Nintendo, your works may very likely be shut down and all that time spent is wasted. There have been cases of this happening and not happening... it's a gamble and it's that most precious of commodities, your time, you are gambling with.

Bottom line:
Will Nintendo come after you if you do this? Unlikely. But if you are an aspriing game developer, best to start your career on the right foot than with bad habits.

Okay, I see, I just wanna get something straight. I have tons of other original games in mind (I would write up tons of stuff and some very dumb crap) since I was a kid, but this just standed out more. If I made this game, it would be to have fun, not to gain respect/recognition.

To help you understand these issues more clearly, let me add that US copyright law (and it's a good point that was brought up that this is ONLY in the US and other countries that reciprocate) allows for what is known as "Fair Use" for education and satire.

So if you wanted to make a Mario model to learn modeling techniques, that would be fine. To learn how to integrate that model into a game would be okay as well if you don't release the game. But doing it to make a modle or game that you will make public, be it for free or not, would not be okay.

Likewise, if you wanted to make a satire of Nintendo or the Mario franchise, it would be okay too. However, note that this is iffy for one mans satire is another mans sequel if you catch my drift.

So long story short, as long as you keep your works private and are only using them for educational purposes (so for example you post screenshots of your work for critique) but never release them, you would be fine under the "fair use" clause. It's anytime you make things public that Copyright law gets dicey.

You could also write them a mail and ask them if its ok to use some of the copyrightet material. Thats what I would do