bnetd is a "server simulator" for Blizzard Entertainment games that connect to Blizzard's multi-player service Battle.net. It was originally written to support Starcraft (the project was originally called "StarHack" in 1998 and also included other tools).
Currently, bnetd supports Warcraft II Battle.net Edition, Starcraft (and Brood War), Diablo and Diablo II.
bnetd is distributed under GPL, ports exist (as far as I know) for *NIX and Windows. The home page is at <http://www.bnetd.org/>
The reason of bnetd's existence is that most of Blizzard games only support TCP/IP games via Battle.net. In a typical gamer LAN, a connection to the Internet is definitely not a certainty or even desirable, while TCP/IP in itself is a must-have and no one wants to mess with IPX or crap like that. Besides, Battle.net has a reputation of being a teensy bit unstable at times. Thus, there's a distinct need for something to let TCP/IP games happen in LANs.
Also, bnetd is much more than passive entertainment because it also allows you to manage who is playing and what. It can be configured freely. The players don't need to be running the most recent version of the game (but you can, of course, make them auto-update). You can manage who is allowed to play on your server, ban people, manage chat channels, and so on. You can even optionally gateway your chat channels to IRC! You can log things and maintain your own ladders and player rankings. bnetd also optionally supports bots (Battle.net doesn't allow them any more). And, of course, the thing most people run into in Battle.net: "The ability to have a nick that doesn't end in a 5 digit number. :)"
However, Blizzard - or more likely Vivendi Universal, their parent company - doesn't really think highly of bnetd. This is somewhat odd, because Blizzard has, in past, shown very much tolerance for external Internet game enablers (Kali, for instance). They can't be that much in love with battle.net, can they? Also it's odd that they claim bnetd is unacceptable because it doesn't check for the validity of CD keys, but when bnetd people wanted to implement it, Blizzard refused to cooperate.
Blizzard didn't really also like the fact that someone forked the code to create a version of bnetd that supported the Warcraft III beta version - thus greatly interfering with Blizzard's idea of controlled open beta test. This probably just got them angry at the things people can do with open source stuff...
The Big bnetd Lawsuit
(Some notes from completely-non-lawyer-not-even-US-citizen point of view)
In 2002-02-21, Vivendi invoked the power of DMCA. This is probably the biggest lawsuit the team is facing (That is, Vivendi is really serious now and not just sending cease and desist letters to stir the anthill.) Electronic Frontier Foundation (EFF) is helping the bnetd team.
What's interesting is that in the current gigantic lawsuit, Vivendi backed down on the DMCA claims once and decided to only accuse bnetd folks of traditional copyright infringement (that is, messing with Blizzard client/server code - this is a ridiculous claim and bnetd folks can probably prove them wrong), but they now seem to be doing the DMCA thing again.
Sources: the home page...