MK3 had done its business in arcades, and performed quite serviceably on the extant consoles as well, including the shiny new PlayStation, but the buzz was certainly nowhere near what it had been during the heyday of MK2. In an attempt to remedy this, Midway decided to emulate the most critically despised feature of its closest competitor: the non-sequel sequel, more commonly referred to as the upgrade.
Attempting to appear responsive to fans' griping that the third game hadn't been as groundbreaking as the second, the designers made it known that they were paying close attention to fan input on designing the inaccurately named Ultimate Mortal Kombat 3. Message boards swarmed. Magazines printed summaries. The results, unsurprisingly, were stupid.
Primarily this is because the fans wanted more MK2, and almost all of the suggestions boiled down to "make it more like MK2." So back came Scorpion, Reptile, Kitana, Jade, and Mileena, palette-swaps broken only by sex. The male portion of the palette-swapping duo, the mighty and stick-legged John Turk, also reprised two roles that had diegetically ceased to exist in the series continuity, "Classic" Sub-Zero and "Human" Smoke, along with Ermac, who was "created" as a hoax back in MK1. A few of the classic Outworld backgrounds returned as well, but really, now that we've had 3D backgrounds for a while, who gives a shit?
None of these characters added much to the game; most of their functionality had been rendered redundant by MK3 new cast, and in practice they were mostly interesting for people who didn't like or wouldn't learn any of the new affordances built into MK3's design. At any rate, UMK3 attempted to respond to accusations that the series wasn't as innovative as it used to be by explicitly recycling its own past.
In short, UMK3 was kind of a pointless "internet only" release of a game, appealing for diehard fans, but not particularly noteworthy from a design perspective. The rights to console adaptation of UMK3 were sold to Sega, who released it as an "exclusive" to their already faltering Saturn platform. Not willing to forgo the more lucrative PlayStation and Nintendo64 markets, Midway quickly came up with Mortal Kombat Trilogy, which was basically UMK3 with an additional level of recursion.
So the games built, in part, on what the fans wanted, ended up exacerbating all of the fans' complaints, because it turns out the fans aren't always the best designers. That's why they don't get paid to, y'know, design. But lo, respite on the horizon! The new, 3D Mortal Kombat 4 was to follow, cross-marketed with the series' first genre jump (the quirky but underrated MK Mythologies: Sub-Zero), and a brand new story that didn't involve Shao Kahn at all! Most importantly--this became a mantra for the fans--there would be no more silly, cartoonish fatalities (or babalities, or animalities...). No, MK4 was going to be a return to the dark and violent milieu of Mortal Kombat.
MK Mythologies bombed. MK4 added in some thoroughly disposable new features, including the most limited "3D" movement since Fatal Fury 2 did it with sprites, and left people generally unimpressed. Tekken was busily making the series irrelevant, and arcades were dying around both of them. The storyline, despite having the advantage of a very filmic paratext, was more vague than its predecessors: how Shinnok (the new villain) intends to take over the world through the not-officially-a-tournament tournament is rather unclear. In fact, diegetically, Shinnok seems to have no powers at all: humans can make him perform "impersonations"--a simplified form of Shang Tsung's morphing that wouldn't cause problems on CD-based consoles--but Shinnok the end boss ran around and threw rocks. As is, apparently, befitting a fallen elder god ruling over a desolate parody of the heavens in which he once served.
On the bright side, it was nice to be away from Kahn for a while, and once again the designers seemed determined to keep supplying us with fresh faces, despite the fairly large number of returning favorites befitting a series reboot. To that end, the (dead, it has been implied) Kung Lao has been replaced with the more interesting Fujin, the (dead, it is stated) Kano is replaced by the...well, not-that-different Jarek, Tanya points to the still tumultuous situation on Outworld, and Quan Chi makes his appearance as the only thing anyone will remember about this game. There's even a character added in v2.0 that's implied to be a weakened and pissed-off Shao Kahn, but turns out to be...well, nobody in particular.
Really, the only reason I bothered to spend more than a sentence on MK4 is the Feuding Ninja Paradox, which is not only an excellent name for a rock band, but a continuity clusterfuck more emphatic than even the Shao Kahn Shenanigans that preceded it.
Shamelessly plagiarizing one of the more long-winded and arrogant theorists, it bears repeating: For a sequel to take place, there must first be a coherent and reasonably specific decision as to which possible chain of events actually happened in the previous game. In the canonical conclusion of MK1, Liu Kang wins the tournament, an event that happens only in Liu Kang's ending. However, the events described in Cage's ending, aside from the victory itself, also take place: Cage has, in fact, made a movie called "Mortal Kombat." Likewise, Scorpion has killed Sub-Zero, as happened in his own ending, and as was explicitly contradicted in Sub-Zero's ending. The world is not swiftly brought to its end, as it is in Raiden and Kano's endings. The only element common to every ending, Tsung's defeat, is canonical. The rest seems to be a mishmash of all the endings, excluding only the events that explicitly contradict each other. This rule seems to apply throughout the series: Kung Lao dies in Liu Kang's MK3 ending, but also in his own, and so we aren't surprised not to see him in MK4.
In MK2, the recognition and reconciliation between Scorpion and Sub-Zero occurs in both characters' endings, and is nowhere else contradicted. It is the conclusion of Scorpion's character arc, and the reason for his absence in MK3. Midway went out of their way to reboot the Sub-Zero character, dramatically altering his trademark appearance, giving him new antagonists, and making him a white-hat rebel at war not only with the forces of Outworld, but with his former employers as well. Scorpion's UMK3 ending actually has him enlisted by Kahn to fight against the good guys, only to turn around and kill his master when the orders conflict with his spectral prime directive of "protect Sub-Zero."
Which is why it confused fans when Scorpion entered MK4 consumed with a desire to take vengeance on Sub-Zero, who murdered his family. The text very nearly provides a way to fanwank this problem, but gets caught up in the details. Clearly, this would require some sort of retcon, an official overwriting of an element of the canonical story. The lead designer went in a different direction, stating that all the games' endings were just hypotheticals, describing what would happen if that particular character had won the tournament. Since neither Scorpion or Sub-Zero won MK2, the reconciliation never occurred, and they were arch-nemeses again.
Conveniently, this logic undoes not only the Scorpion/Sub-Zero storyline of MK2 and UMK3, but also everything that has ever happened in the series past the conclusion of the first game. After all, the designers remind us that there hasn't been an "official" tournament since the first game, and they've decided on no winners since then, nor have they defined the consequences for any of the parties involved. While the fans were busy arguing out a canon, the authors helpfully reminded us that almost nothing in the entire series was canonical, and there need be no narrative connection from game to game.
Which is, I suppose, one way to solve the Problem: by stating it openly.
After MK4, it was announced that the follow-up would be a reboot to the series, a return to the dark and violent milieu of Mortal Kombat. The series picked up, eventually, with the console-only Deadly Alliance, which brought back some characters declared dead, killed some other characters, and brought in an entirely new, and quite brilliant, set of play mechanics. It broke the million-sold mark, but the diehard fans were furious for the game's severe dearth of the stupid bullshit they'd begged them to take out of previous iterations of the game. A sequel followed, Deception, finally attempting to paper over the giant story holes and answer some basic questions about the universe. Another sequel followed, Armageddon, in which the (hilarious) plot concerns the possibility that the ever-growing cast of the series will cause the universe to collapse under the weight of its own convoluted continuity. (It also, curiously, extended the tutorial "Konquest" mode into a full-length adventure game.)
Now, our eyes are drawn to 2011, two decades after the release of the first Mortal Kombat, and we have been promised that it will be a reboot, a return to the dark and violent milieu of Mortal Kombat. MK storylines are always best when stealing from other media, and I think the Star Trek reboot is a fine place to start. Warner Bros., the new owners of the franchise, are reputed to be interested in expanding the brand into the multimedia juggernaut that never quite came together under its previous stewards. The MK universe has all the raw materials for a pretty interesting fantasy world, which is why the fans have been so inclined to try to make sense of it, even when the authors couldn't be bothered to do so, even when the genre conventions worked against them. Here's hoping someone's actually paying attention this time.