MLP Online is a fan made My Little Pony Friendship is Magic MMO, currently being produced by Urimas, Salty Justice, and their team of programmers, spriters, and other members in a custom made C++ engine. The project has been in development for a while now, and when finished, will be 100% free to play.
The MMO is still in its early stages, but a lot of the features are already nearing completion The game currently has eight different movement directions, functional NPCs, flying, bucking (Kicking objects around) and several maps.
Currently, the sprites are a major developing point in the project, many different sprite sheets have been made for the mane cast and many other ponies who will be in the game. You can find a demo showing the current progress of the game HERE.
The battle system is currently being worked on, you can play a short demo of what it might look like HERE.
The team is also working on scripted events, allowing for small cut-scenes to take place, as seen below.
A short video demonstration of the battle system
Currently, only Ponyville and Sweet Apple Acres are the two completed maps, and Fluttershy's cottage is being worked on. There will be many other maps in the near future, allowing players to fully explore Equestria.
MLP:Online Alpha 009 Demonstration
Urimas has released a small Sprite Test game, though he says the test is not an actual part of the game engine itself, and is just a temporary way of showing people what the team has achieved so far.
The Sprites shown are the walking and running sprites, though there are trotting, jumping, flying and bucking sprites also completed.
If you're looking to join the production team for this game, there is a section on the forums HERE that lists all the different open positions, though if there's something that's not there that you want to help with, sending Urimas a friendly message asking about it probably wouldn't be a bad idea.
The game is in its early stages, so feeback is welcome, you can give some feedback about already implemented features HERE or suggest new ideas for the game HERE.
Salty Justice also does daily reports on the game's progress, if you want to follow up with that, the topic can be found HERE.