Escape Velocity takes place in a galaxy divided into four factions: Confederation, Rebellion, Traders, and Pirate. In the aftermath of a war against alien invaders the galaxy was split with the Confederation controlling stellar systems around the Solar System, the Rebellion holding the most outlying systems, and Traders stuck in the middle while Pirates went after anything they set their sights on. By accepting quests the player can ally themselves with specific factions, gaining the favor of their comrades and the enmity of their enemies.
The player starts with a personal shuttle with a small cargo hold and a much smaller laser. By trading goods between systems or taking on quests they can put together enough credits to buy new ships, from lethargic cargo mules to the swift and deadly Kestrel to even fully outfitted battle cruisers. Enemy ships can even be taken over provided they are disabled, but not destroyed, and the player's ship has enough crew to overpower the other ship's. Ships can be upgraded and outfitted on planets with more powerful lasers, missile pods, hangar bays, radar systems, efficient propulsion systems, and more. The best equipment is only offered to captains who have gained the friendship of a major faction.
In addition to their own ship the player can hire additional ships to their fleet, both cargo carriers and attack ships, and they will remain loyal so long as the player can afford their fee.
Because Escape Velocity takes place in space ships are not subject to inertia. A ship will continue to travel in a given direction at a constant speed if no additional propulsion is administered. Some systems will have asteroids, which will block lasers and missiles if the player gets into a firefight. While docked at a space station or planet the player can buy and sell trade goods, take on time sensitive missions, upgrade their ship, or visit the bar and possibly find a story mission. If a planet is unfriendly the player may need to bribe their way in, or they can demand tribute and fight the planet's entire armada. If they survive they will claim domain over the planet, and receive regular revenue from all such owned planets.
Escape Velocity is shareware, and randomly when flying through the galaxy the player will receive a communication from Cap'n Hector, reminding them to purchase the game. After 30 days Capt'n Hector will turn hostile, and is nearly impossible to kill. She will continue to respawn and attack the player every few hours until the player finally purchases the game.