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An otaku (おたく) (plural usually otaku, though otakus is not unknown) is a variety of geek (or an overly obsessed fanboy/fangirl) specializing in anime and manga.
The word is borrowed into English from Japanese and is derived from the Japanese o (お)(honorific) + taku (宅)(house, home). Because it is a modern term, it is usually written in katakana. It was used in the 1980s as a second person singular pronoun among hobbyist photographers. As it gained familiarity, the word was soon used by others to refer to hobbyist photographers. Since the photographers were seen as socially unskillful, reclusive, and obsessed with their hobby, otaku picked up those negative connotations and eventually was used to refer to any reclusive, obsessive hobbyist. A common stereotype is the young male otaku who lives at home without a job, has few social contacts outside of his otaku friends, and, who may be on the verge of becoming a dangerous stalker. This was further reinforced by the case of Tsutomu Miyazaki, a serial killer who raped four small children and ate parts of their bodies. He was revealed to be an otaku after his arrest in 1989.
An otaku is an obsessive fan of any one particular theme, topic, or hobby. Perhaps the most common uses are anime otaku (who sometimes enjoy many days of excessive anime watching with no rest) and manga otaku (Japanese comic books). Japanese culture has many other varieties, such as pasocon otaku (personal computer geeks), geimu otaku (playing video games) and otaku that are extreme fans of idols, heavily promoted singing girls. While these are the most common uses of otaku, the word can be applied to literally anything. Thus, you could have music otaku, martial arts otaku, cooking otaku, et cetera.
Otaku has much stronger negative connotations in Japanese than it does in English, and some American anime fans have adopted the term and use it proudly.
A loose translation of the word otaku is fanatic. So, anime otaku = Anime Fanatic. In the more recent instances of Japanese fans using english fan terminology, otaku are sometimes called 'mania'.
See also: anorak.
Otaku culture outside Japan often makes extensive use of Japanese loanwords. This can create an effect that is similar to Engrish, where the otaku will use Japanese phrases in conjunction with English. Because many otaku loanwords come from the Japanese "feminine" vocabulary (especially words usually reserved for very young girls/women), this has the amusing effect of causing male anime fans to sound like small girls.
Anime and manga are two English words that were once solely otaku vocabulary, but have become common English. Before the term "anime" was adopted into English, they were simply called cartoons (e.g. Speed Racer).
List of common otaku loan words:
Also, the term "glomp" (to latch onto or hug with much enthusiasm) is often used in anime fandom. The word is said to come from the anime series Ranma ½, where the character Shampoo would at times overzealously hug the main character, Ranma Saotome; the onomatopoeion of said hug would be 'glomp'.