An independent artist created a sonic the hedgehog sprite sheet and as long as I give him credit, I can use it. My questions is: Is there a legal disclaimer I can put on the screen that says this is not made by sega...etc to avoid being sued. I simply want to make a sonic game for fun on the iphone and provide it free of charge to anyone. Will I get sued for doing that or is there a way I can state this is for fun and the graphics were independently. Or is this a shady idea?
You absolutely can't distribute a work that is using established IP like Sonic the Hedgehog regardless of who drew the artwork.
As to whether or not you would be sued, to be honest, you probably wouldn't be because Sega probably wouldn't notice, but you certainly could be sued, and probably would be if you were in anyway successful. Actually unless you were doing something really malicious, they'd probably send you a cease and desist letter first and then sue you if you didn't comply.