Note: For those who do not know what MUGEN is, check this for a basic summary.

This is not an apology for MUGEN.   In fact I will go right ahead and say that currently MUGEN is not user friendly, lacks many features, is quite buggy, is hard to work with, etc.  For a lot of people, it really isn't worth the hassle to put up with MUGEN's many problems.  This limits its appeal to a very limited audience.  This leaves us with the question though, "who is MUGEN for?"  It's obviously not for those who want a perfectly balanced multiplayer game to play against comrades.   It is also not for those who play fighting games in any sort of hyper competitive manner.  Heck, its not even a good starting place for people new to fighting games since they may pick up bad habits from it.

MUGEN is for the people who like to see extremely specific match-ups.  In the same manner that Street Fighter 2 Anniversary Edition could let you pit SF2 Championship edition Ryu against his Super SF2 Turbo counterpart; MUGEN lets you do that on a grander scale that crosses licenses.

MUGEN is also for people who are willing to go to great lengths to see a certain character in a fighting game.  Make no mistake, this is not an easy task.  Creating a quality character for a fighting game never was and never will be an easy task.  But for the people that desperately want a Capcom VS DC or Guilty Gear VS Melty Blood, the tools are there in MUGEN.  

Lastly, MUGEN is for the people who want a single player fighting game.  As far fetched as that may sound at first for many fans of the genre, there are people out there who want more emphasis on the single player experience over multiplayer.  This is where the character imbalances work in MUGEN's favor as you can choose what type of characters to fight as and against.  Maybe Capcom was unto something with Red Earth? 

Again, MUGEN is not a good fighting game for many people.  Heck even MUGEN's own community hates calling it a game, and prefers to call it a game engine.  What gets to me is when people say MUGEN has no soul, ignoring the original content made for it and the time it took to make that content.  Besides, wasn’t the Marvel VS Capcom series tad bit unbalanced but featured the type of dream matched people wanted? ;) 

tl;dr:   MUGEN isn't for everyone, but it has its moments of awesomeness for the people that give it a fair shot