"Shenmue Online" was to be a MMORPG (Massively multiplayer online role-playing game) set in the Shenmue universe. Due to the genre of the game being shifted from the first 2 games traditional action adventure to MMORPG the player would not control Ryo Hazuki but would instead create a player themselves for use in the online world of Shenmue Online. The game featured a new graphics engine, fighting system and many other features. Apparently players would join 1 of 3 gangs led by Shenhua, Xiuying Hong & Ren (all major characters from Shenmue II). The gameplay would feature quests, battles and mini games. From gameplay footage seen on Youtube the graphics and battle system resemble that of Jade Empire with different fighting styles and spells and magic being used.
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The game was initially being developed jointly by Sega (led by Yu Suzuki) and a company called JC Entertainment. In 2005 JCE pulled out and then tryed to legally block Sega from carrying on development, however they were unsuccessful and with the help of an unknown Taiwan based company development continued into 2006. A new trailor was shown at the China Joy convention in July 2006 showing improvments from the previously shown screenshots. Since then news on Shenmue Online has all but dried up and various gaming websites have reported its cancellation. As usual Sega has neither confirmed or denied whether it will ever be released.