During World War II, Britain built large sea forts at the edges of its territorial waters, three nautical miles from shore, to protect against a sea invasion by Germany. However, they built Fort Roughs Tower beyond their territorial waters, no doubt unsuspecting the 'international' crisis that would eventually ensue.
In 1967 Major Paddy Roy Bates occupied the island and declared it a sovereign principality, appropriately named "Sealand." For the past four decades Bates and his family, with rotating visitors, have occupied the island, named themselves Royalty, and gone about their business much like heads of state.
In 1978 a German citizen claiming to be the "Prime Minister of Sealand" attempted to take over the island while Bates was away. Bates retook the island by helicopter attack and held the German captive. First Germany attempted to negotiate with Britain, who said Sealand wasn't their country. The Germans then negotiated directly with Bates, and after a few weeks their countryman was returned. This encounter bolsters Bates' claim that Sealand is a nation, as Germany recognized them in negotiation.
Since this time Sealand has fired at the British Navy, issued passports, minted coins, and participated in international sporting events. Most of these events have gone awry in one way or another. For instance, because there were so many fake Sealand passports in existence, the Royal family voided the validity of all Sealand passports in 1997, including ones they themselves had issued.
There was a fire on the island in 2006, destroying the main power generator. The Royal Family began asking for donations to rebuild their island home. Currently, the Prince Regents lives in Essex, England but has representation on the island.