From the time it became apparent that there would be no FS3 the most repeated complaint the community had was that Volition wouldn't release the source code so that the community could work on it themselves
Quite a while after the release of FS2 Volition finally did the decent thing and released the code. It was immediately leapt upon by almost every person who could program (and some who couldn't and learnt in order to take advantage of it).
An organisation was set up called The Source Code Project (SCP) who took the code with the intention of making FreeSpace 2 better. The product of their work was called FS2_Open.
FS2_Open is not FS3. Instead it is a replacement for the FreeSpace 2 engine, a sort of super mod for FreeSpace 2 which improves it no end. The idea is that by running FS2_Open you can play the FreeSpace 2 main campaign and all the FreeSpace 2 mods with better graphics.
In addition to this improvements have been made to several of the games basics to add new kinds of weapons and missions that couldn't be done before. These improvements won't show up in the main campaign but will show up in special "Made for SCP" mods and campaigns (Some people have gone further and are working on stand-alone total conversions which don't require you to even have a copy of FS2).
The differences between FS2 retail and FS2_Open are breathtaking. It is almost like playing a new game. The project is not finished however and it continues to astound the community with every release.
Minimum system requirements:
CPU: 1.3 GHz
RAM: 1024 MB
GPU: OpenGL-compatible supporting Shader Model 2.0
HDD: 3.0 GB or more, depending on what is installed.
AND: For FreeSpace based mods you'll need a retail FS2-copy and maybe a JavaVM for the installer(see here for manually installing)