I think "a" favorite fangame would be too hard to pick, so among the ones I greatly appreciate (that are coincidentally all available on Steam), I'd say :
Tenjou no tempest
https://store.steampowered.com/app/994020/Tempest_of_the_Heavens_and_Earth/An unusual Tenshi fangame that can confidently hold its head up despite being a decade or so old. It's got an unusual respectable storyline that picks up after SWR but does have girls from newer games at the time, intersting power system and abilities you can choose for whatever suits your playstyle, solid spritework, solid soundtrack, ABSOLUTELY EPIC BOSS BATTLES, and challenges. My personal favorite as far as fangames go
The Genius of Sappheiros
https://store.steampowered.com/app/2101110/V/A bit complicated, but I'd say a particularly cool RPG. I actually haven't played this version (the one I'm familiar with is the Weekend version), but it's sure to have improvement over previous versions. In RPGs, solid gameplay is generally kinda expected to be there, with the story being the highlight ; but the Genius of Sappheiros is actually the opposite : the story is, uh, kinda barebones or just a very slight bonus, but it's got a very GREAT gameplay. It's really hard to explain what makes this game cool especially since it's got an EXTREMELY VICIOUS AND FRUSTRATING early game and tricky bosses (plus some enemy compositions), but imo the sheer control you have over how you wanna play the game, from the equipment to the way you wanna augment your characters plus the formations and how you'd optimize what you have in order to tackle dungeons or specific bosses, plus an unique system for item drops, honestly makes it so that it's pretty satisfying when things go the way you want. It's a VERY brutal game plus fairly unusual system and even unpleasant surprises from bosses, but if it wasn't for the fact that this was just a fangame of some obscure japanese series, I believe it could have risen amongst the greats purely with its gameplay alone.
(I've also seen a speedrun of the game and man, that was the craziest speedrun I've ever seen what's with all the RNG manipulations, enemy dodging, manipulations of chance encounters and item drops. I don't remember the video or what the occasion was, but it was extremely technical, calculated, and planned by a team of particularly passionate folks who wanted to do it)
Lost branch of legend
https://store.steampowered.com/app/1140150/__Lost_Branch_of_Legend/My new flame as far as new stuff goes (Chinese Touhou fangames kinda went hard these last few years). Roguelike deckbuilder à la Slay the Spire (a classic) so you already know something good's brewing, plus colored mana based of Magic the Gathering. Game's still in early access, but already has currently 4 playable characters, 1 on the way and another one planned to be a little bit different, with 2 playstyles per characters and that's without talking about builds, different difficulties for the game, plus challenge à la Ascension from Slay the Spire, and a possibility to customize the runs. Honestly, while it takes heavy inspiration from other games (and even straight up mentionned StS in the tutorial), it's all around pretty good. It's got nice illustrations for the card and random events, and it's got a pretty nice soundtrack. Definitely interesting to see where it goes, especially considering that fact that it does all that and is still in early access.
