Fungible and Non-fungible tokens
First in order to understand non-fungible tokens it's good to understand what are fungible tokens. Bitcoin, Steem or any other cryptocurrency are technically known as fungible tokens. That word Fungible means that each Bitcoin is worth the same as any other and they are interchangeable, just like you and I can exchange dollars we have in our wallets, because they are interchangeable or the same. Non-fungible Tokens or NFT’s are different, in that each is created to be unique, to represent something unique. They can describe an entire object or a specific piece. For example an NFT could represent your entire body or a piece of it, like your right arm or left leg. The NFT for your arm would differ from the one for your leg and they would not be interchangeable, just like your arm and your leg are not interchangeable. Nonfungible is a long word and not easy to say, so a popular abbreviation for it has developed and it is NFTs.
Video game assets can be changed to non-fungible tokens or NFTs
In your normal video game you win items. These can be clothing, armor, swords, bows, arrows, guns, knives and various other things, which are valuable in the game. But these things are software constructs, which don't exist outside the game and frequently can't be transferred from your old character to your new character. They certainly can't be transferred to another player the majority of the time and although they may represent hours of game play to earn these in game items you don't own them and can't sell them. However, if those items and the game they are in were on a blockchain, those items can be represented digitally as tokens and you could own them. Once you have ownership, you can buy and sell these unique in game items. But some in game items are so common that they have no value, but others are rare and are valuable to other players to use in the game or as collectibles. For these items it is perfect to represent them as non-fungible tokens or NFTs.