Steampunk is one of those strange genres where people often know the name, but aren't entirely sure what it entails. In its simplest form, steampunk is usually set in Victorian London, but as it's a form of alternate history, the protagonists have access to all kinds of technology not seen in the history books - the only proviso being that is powered by steam.
According to Matthew's blog, "Steampunk, in its most simple definition, is a type of fiction that places contemporary technology in the Victorian Era with Coal (and thus Steam) as the primary power source instead of Gas or Electricity." If you check that goldmine of information (sic), Wikipedia, they define steampunk as "works set in an era or world where steam power is still widely used — usually the 19th century, and often Victorian era Britain — but with prominent elements of either science fiction or fantasy."
I agree with Matthew that historical accuracy isn't a major aspect of steampunk due to its inherent nature in the same way that much science fiction isn't strictly scientific in nature. Even the setting of steampunk can be fluid - it doesn't have to be London, although the period is pretty firm. Personally, I'd be fascinated to read steampunk set in 19th century Paris or Moscow. I believe the single 'fixed' point of steampunk is that it IS set in the past, and that the only technology available should be that which could conceivably be driven by steam. So you couldn't have electronics as it would be pretty difficult to power them with steam, but cars, airships, and other forms of machinery are all possible. The first internal combustion engine was designed in 1807 and Karl Benz began selling vehicles in 1888 so automobiles aren't entirely out of place.
However, I would argue that a book or film can have steampunk sensibilities, without necessarily being hardcore steampunk - China Mieville's Bas-Lag trilogy would be a good example. This is how I explain my own work, The First Tale. I chose a rough steampunk setting for my Tales from Vertigo City project, and Vertigo City is based on Victorian London, down to its brick-lined sewers and bizarre emporia. Transport comes via omnibuses and trams, although cars make a rare appearance. The clockwork automatons and antiquated weaponry are a nod to steampunk, while protagonist Philip Wiseman favours the frock coat fashions of a 'dandy'. It only really deviates from true steampunk in that a) it is not set in London, b) the fashions are not strict Victoriana, c) I got zombies and even steampunk mecha in there and d) Liss has the ability to throw energy bolts at people.
To me, the most important element of steampunk, besides the technological constraints and time period, is that is is fun. Alternate history has the potential to be fascinating and thought-provoking, but the nature of steampunk lends itself well to adventure stories, and personally, I think there just isn't enough adventure in mainstream fiction these days.
I'd be fascinated to hear what people think of steampunk!
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The image for this post is by the stupidly talented Tom Brown, the artist behind steampunk web serial comic 'Hopeless, Maine'. More of his art can be found here, while Personal Demons, the current book in the serial, is here.
Don't forget, The First Tale is still only 99c on Smashwords. At the time of writing, that's just 63p!