A Hoax is basically described as "anything deliberately intended to deceive or trick". It is common to find hoaxes on the interenet, and some have become famous due to the amount of people believing in them (Like for instance, the idea that Luigi was unlockable in Super Mario 64).
While MFGG hasn't commited any huge hoaxes itself, many of it's members have created hoaxes as a form of art, whether it be editing screenshots by photoshop, or simply by creating artwork that looks real. Nite Shadow is one of MFGGers top hoaxers, although there have been many that have attempted to make hoaxes themselves.
Some hoaxes, however fail to to appear believeable, so putting a Sonic 2 styled Sonic in Super Mario World wouldn't be believable because of pallette and space restrants. The large majority of user-made hoaxes tend to be like this, meaning only a fraction of hoaxes around could be of a high standard.