Shanzhai is translated into English as mountain fortress, in reality it means a cave, a hideout, the kind of place where guerrillas or bandits are based. It is now used to describe technology entrepreneurs who take a homebrew attitude to hardware engineering and a bucaneer attitude to intellectual property.
Want a mobile phone that doubles as a cigarette holder or an iPhone clone with a user-replaceable battery, the shanzhai fill that market. You could think of it as piracy, a hardware equivalent of mash-ups or modern-day equivalents of craftsmen who used to cater to dandy gentlemen.
They share designs and bill of materials rather like the original Homebrew Computer Club members.