Basically, the British Military set up these AA defense outposts along their east coast during World War II. After the war, they pulled them all down but one, which was left deserted. This base was outside of the current territorial waters of Great Britain, and so according to international law, it could be occupied. And it was, by British major Paddy Roy Bates, who promptly hoisted his own flag and founded his own state called the Principality of Sealand, on Sept 2, 1967. GB didn't like this, so they sent warships to try to take possession ot the base (brute force on top of stupidity). Now, this base may have been deserted, but it wasn't unarmed. He 'availed' himself of his right to self-defense, and fired warning shots at them. He was taken to court over this, but it was decided that the power of the courts didn't extend out that far. So legally, he is the rightful ruler of this miniscule state. As of Sept 1998, he has 160 000 subjects, and interestingly enough, as nearly all of his subjects are wealthy businessmen, his country has the highest per-capita wealth in the world.

Official Websites:
http://www.principality-sealand.net
http://www.sealandgov.com
http://www.havenco.com