Cell Fracture

This entry will cover the basics of animating the fracture of an object.  This entry is based mostly on information from the following video:  Blender Cookie Tutorial

The first step is to find and enable the Cell Fracture add-on in the User Preferences.

At this point a new button will appear in the tool panel [T].  With your target object selected (for this example I'm using a stretched Torus), press the Cell Fracture button.

This will bring up the following window.  For simplicity, I won't be going into detail about these different controls, the video goes into a few of them.  For the sake of keeping this demo short, simply press OK.

This will trigger a series of voronoi blocks to be created within a bounded area, and through boolean subtraction, the shards are created.  Note however, once this process is finished, your fractured object will be on Layer 2.

At this stage, your object is now fractured (with physics), so it's ready for animation.  You can see that each shard is an individual object now.

The simplest animation approach would be to add a Plane underneath your object, and simply hit [P] to allow the Blender Game Engine to play the physics out.

To add a little more quality to your animation, you can record the game engine sequence by selecting Record Animation under the Game menu (while in Blender Game mode).  With this box checked, when you play [P], and then [Esc] (to stop the animation), all the parts in the scene will now have key frames which can be used in the rest of Blender.

With this keyframed information, you can now render it as a full animation with better lighting and camera 

movements.