This is a word I think every modern day human being should know, as it is basically the evolution of language! And we're seeing language evolve faster than ever as the digital world grows and people look for more effective ways to communicate with each other... But this is a book blog (blog is a neologism!) not a communications seminar.
Neologisms are commonly found in fantasy and science fiction to help readers dissociate from the world they know and believe in a world they don't know. Obviously, not all words found in fictional worlds are going to be accepted in ours, but some take off.
For example, most people understand 'chortle' is another word for 'laughter', but this word didn't exist until Lewis Carroll wrote Through the Looking Glass. Books that contain themes of totalitarian governments and anti-utopian societies are often called 'Orwellian' after George Orwell who penned 1984. There's also a concept called 'catch-22' where an individual can't escape from or solve a negative situation due to a set of rules that conflict with each other. This neologism is based on a novel by the same name, Catch-22 by Joseph Heller.
I also think it's interesting to note that in the world of pscychiatry, neologisms are considered normal in children, but can be a sign of mental illness in adults... It's a fine line between imagination and hallucination.
Ever invent your own word? Got an example of a neologism?