The FAQ is here ... some interesting entries from it are reproduced below:
How do I play?Click on the Create a Nation link and follow it from there. You'll be asked to choose a name for your nation, a motto, a national animal, and a currency. Then you answer a short questionnaire about your politics. This will determine what sort of nation you end up with: authoritarian or permissive... left-wing or right-wing... compassionate or psychotic... you get the idea.
Once a day, you'll be faced with an issue, and need to make a decision as to what to do about it. This determines how your nation evolves.
So what is this?Jennifer Government: NationStates is a nation simulation game. You create your own country, fashioned after your own ideals, and care for its people. Either that or you deliberately torture them. It's really up to you.
Is it a serious political thing, or just for fun?
Well, you can play it either way. NationStates does have humorous bent, but that's just because international politics is so inherently funny.
Why is my nation so weird?Everything is exaggerated a little. Well, okay, a lot. Your decisions affect your nation very strongly, so your country might seem like a more extreme version of what you were aiming for. Unless you have radical politics. In which case you probably think nothing's wrong.
My decision had unintended consequences!Yep, that'll happen. For one thing, see "Why is my nation so weird?" above. For another, pretty much every decision you make will involve a trade-off of some kind. It's kind of an exercise in choosing the best of a bunch of bad options. You might find this frustrating, especially if you're the kind of person who thinks the solutions to all the world's problems are obvious.