"A fake book is simply a book full of lead-sheets. A lead-sheet is the melody, chords indicated (usually without fret board diagrams), and the lyrics (often not even all the verses.)


It is called a fake book so that a band can "fake" the song in performance, as if they really knew it and had practiced it before.


They grew up in the early days of the commercial music scene when a musician or a band began earning much (if not all) of an evening's money from the tip jar. When a patron asks if you can perform a song, if you say "Yes, we'll get to that in the next set" you will get a tip (as the evening goes on and the patrons are more sauced the tips often grow from Ones to Fives to Tens, and for especially sentimental song requests from singles maybe even a Twenty), but if you say, "Sorry, we don't know that one" you get grumbling about how the lounge shouldn't hire such stupid s**ts." If there is too much grumbling to the bartender or the manager, you don't get hired back.


So if you have a couple of fake books, each with 200-600 (or in the case of the new generations of Hal Leonard and Warner Brothers and Columbia "legal" fake books, as many as 1200 songs), you will stand a much better chance of actually being able to fill the requests.


In the early days the fake books were illegal because some enterprising individual would buy the piano-vocal books (the only way pop music was available commercially) and cut out the melody line (with the chords and the lyrics) and paste it onto a single page (piano-vocal books often take 4-5 pages for a single song), compiling the songs he/she received the most requests for. Then other musicians would ask if they could buy a copy of that book, so the individual would photocopy the book and sell it for $30-$60, in flagrant violation of the copyright laws since no royalties were paid to the copyright owners.


These days the big three publishers have taken to creating and selling their own fake books, from all-purpose ones, to specific category books such as Broadway, Jazz, Country, Christmas, Rock, R&B, Latin.


The biggest fake book came out of Berklee College of Music (not officially, but from students there) in the 60s, called the Real Book. It ultimately came to have three volumes, but the first one is still the BIG modern jazz-mixed-with-standards book. Sher publications came on the scene offering their supposedly "correct" versions of many of the Real Book tunes, although why they didn't just recreate the original Real Book is beyond me. The Sher books, as well as all the modern ones from Hal Leonard, WB and Columbia are entirely legal, with permission gained and royalties paid.


In the early days it was very much a matter of buying from the back of a station wagon on a dimly lit corner late at night, or of walking into a music store and speaking to the owner and saying something like "Joe Smith sent me to talk to you about a special book you have for sale." Then you would hand over $35 (by the time I arrived on the scene that was what the Real Book cost) and get a plain brown bag with the illicit treasure inside. Many music stores got hauled into court for selling them. These days it seems as if the publishing industry couldn't care less about them, but the Real Book (NOT the ones Sher sells) is still illegal."

from: http://www.jazzguitarfaq.com/FAQ00015.htm