Original Characters (OCs) versus Canon Characters
Original Character: A character made by someone, and is not featured in any single show, novel, unless published or created by the person who created this character. They can be inspired by another character, or a real person, the idea is also able to spawn from an event. At this character's core, their creator has thought up their personality, appearance, background; everything related to that character, physically and mentally, has been created by one person or a group of people. (Yes, OCs can be shared!)
They are originals.
Canon Character: This is a character pulled from a show, book, or other type of series with a premade history, and at least a partially formed personality.
What you see, is a general distinction! Just because someone created an OC of their own, does not mean that it's bad! OCs can be very well developed and characterized, too. You should not discriminate if someone has a roleplay blog for an OC, nor should you think yourself as better simply because you roleplay a canon character.
Both are equally awesome.
Sometimes there can be confusion between these two. Can a canon character become an OC? Can an OC become canon?
These answers are completely circumstantial. Sometimes people change a canon character around so much, flipping their personality, changing their past, etc., that it seems like it becomes an OC. Though, in reality, a good roleplayer should always be able to adhere to a canon character's core.
Similarly, in reference to an OC. Say you're watching a show and you see someone in the background, and you like their appearance. You give them a name, a personality, and a background. But suddenly, they become important in that show! Should you change your OC so that it becomes canon?
The answer is no.
An original character can be inspired by a canon character.
There is nothing wrong with that.
Now, there are a couple of things that can be covered with both OC and Canon characters.
First of all, we have headcanons. These are, essentially, ideas that an author/mun have about their characters. These bring nearly endless possibilities. A headcanon could be the character's favourite food, a pet peeve, mannerisms, how they treat others, fears, likes, dislikes. The possibilities are endless. Canon characters aren't the only ones with headcanons, either. OCs can also have them.
Next, we have the Alternate Universe (AU). This deals much more with canon characters than OCs; however, if you have an OC who is linked to a certain series and you'd like to have them interact with people/characters elsewhere, they can also make appearances. This is especially used in human-to-non-human swaps, or vice-versa.
Essentially, an Alternate Universe is another world. It's like moving your character from Pandora to Narnia, or Earth in the year 1000 to Earth in the year 3000. It isn't necessarily realistic.
Also linked to Alternate Universes are changed background. Say your character is a dragon slayer in Camelot.
And now he is a teenage boy attending high school in 21st century downtown New York.
He will have a different past, no? Similarly, key points in his personality, most of which were made through experience, will also be different.
An AU serves to place a character in a new setting, whether that character is Canon or Original.