I'll just post this in its (nearly) unadultered, pastebin glory. Enjoy:
It allows you to punish backwards/safe movement amazingly well. As long as you're aware of how you move to various spacings, it deals with ground camping effectively. If you use it as more of a read, it can also prevent aggressive movement. Anytime someone tries to move forward to take space vs. sheik, you could hypothetically be boost grabbing them. This and dash attack are your furthest threat range from the ground, and you need to represent this in your gameplay.
It isn't complicated, but it is definitely difficult. If the punish game isn't flowcharted for any sheik main out there, I can easily write out optimal (or near optimal) punishes off all the standard situations if anyone wants them in more detail. Versus the spacies + falcon you can tech chase every single option on reaction, period. Against non fastfallers you can chaingrab the DIs away, and use uptilt/turn uptilt/dash upair for the other DIs. Again, in 2015 none of this is a secret; it just requires discipline and hard work.
Amazing and totally underused...particularly aerial needles. The reason they're so amazing is because of the range they cover. What if someone wants to stay outside of your ftilt/grab/fair game? They put themselves in SH needle range. What if they want to respect that range, then move in? They put themselves in dash attack+boost grab range. What if they try to move back at the range that you can dash attack? Platform + full hop needles covers a huge area for their retreat. Every range versus sheik that allows them to challenge you at all is covered by her next level of options. Combine this with the fact that needles only have the standard 4 frames of landing lag, and any needle hit gives you frame advantage or is neutral (in the case where you're not falling/delaying the needles) and they're an incredible tool to both: 1) disrupt the opponent's flow in neutral 2) Counter them respecting your close range game. The fact that you can combo off needles in most situations, or very close to combo, is also very ridiculous. SH needle charge, or dash away SH turn around needle charge: totally covers their forward movement, can be canceled early enough at any point to still go into an AC fair. Lagless + ranged option-->cancel/bait into another lagless option, both of which you can convert off of? Sounds pretty good to me. That's just an example, of course. There are soooooooooo many uses, but the big issue is that they can't be useful unless you establish respect and control with the other elements of your neutral game.
Fair, A Microcosm of Sheik's Gameplan in General:
So first I'll talk about how to use sheik's fair in neutral. Essentially, you have your super safe SH backwards-->AC fair. There are two main variables here that most sheik players already mess up, and even our best sheik players don't do perfectly. If you get this part wrong you can't do ANY of the rest of sheik's stuff out of it, which sucks. 1) Don't jump at a range where if he runs at you immediately you'll either: a) get hit before you can set up the spacing, or b) whiff the fair as he's running at you, and then be in lag as he reaches you. This is specifically in reference to fox, as I think it's the best example of using the fair incorrectly, although it can be generalized easily (don't jump at ranges where immediate approaches threaten you, unless you have a read/good reason).
So now we've established that, ideally, you've jumped at a good spacing+timing relative to your opponent. Now what? Well, you can vary your fair timing. There is a large window during which it will auto cancel, and of course you don't even have to go for the auto cancel. You can just continuously delay it until at the last second you fair+l-cancel it. There are also mixups with when you fastfall during your SH. I'm still talking defensively here, so bear with me; there's a lot more you can do, but you need to be able to do this first. So you're doing your safe SH back, at a good spacing + timing, then you combine your reactions and expectations to vary your fastfall+aerial timing as necessary. Awesome! ...now what?
You have this area around you that you control now. This is where the fun part happens! It all goes back to my favorite thing ever in the history of melee: stage control! (yay). So I didn't actually explain sheik's defensive game at all in this...since this was a post about what people don't do effectively...but you need to have a strong defensive game for the fun stuff and this fair zoning is part of it. So how does this relate to my favorite thing ever? Well, you have this zone around you that you control. Your opponent is respecting at minimum, that much space, and the defensive options you have out of it are awesome: throw out a move, CC, WD backwards, fox trot/dash backwards. Between the fair and the defensive option afterwards, you're pretty much sending out a huge "fuck you" to approach options. Now here's the tricky part: Once you choose your defensive option, you need to use that as a reaction point for your decision making. Here's the example I have most often in my own gameplay: I fair, dash back....and see that they're not taking the space (because they're forced to respect an aggressive option after fair, like dash attack, or dash JC grab). So on reaction to this new spacing, I dash back to my original landing spot. Why is this so cool? You establish control of an area, and despite moving backwards, you get to TAKE THE SPACE BACK. So you essentially get a zoning option, that transitions into strong defense, that allows you multiple reaction points which are usable to take back the space you gave up to be safe in the first place. Following? I hope so. Maintaining stage control is key here, because now you need to *gain* space. Remember, after your (ideally well spaced/timed fair, you can throw out a move, SH again to zone, or dash attack etc. If they're respecting that range, that means its a ton of space that they're giving up to you! So now using options such as fair-->dash/WD forward actually becomes viable/strong. Not only is sheik effectively able to control the zone around her, and maintain stage control even when she gives up space... but she's also able to take stage away from her opponent by virtue of the strength of her options AFTER the fair.
So now I get to talk about the reason I wrote this all up in the first place, and how fair is a microcosm of sheik's gameplay in general. The strength of her defensive options in neutral allows her to establish control, and fluidly transition into more aggressive options. Fair-->dash forward is a perfect example of this, but dashing forward after a fair is a good way to die if you don't actually understand how to establish this level of control in neutral. Strong defense-->transition into strong offense is what it's all about. There are a million more things I could talk about, but this is the gist of it. Sheik doesn't really have any inherently strong aggressive options, but at a high level being aggressive will be as successful as your defense is strong. ***Learning how to do this with sheik is *really* about mastering defensive decision making and neutral in such a way that allows you to continuously react and easily change to the next set of options.***