Shanazar was originally a planet existing on a sub-molecular level, working on laws based on magic and mysticism, and divided into distinctive Zones similar to Mobius. The central Kingdom of Shanazar and most of the nearby areas was a sort of Arabian Nights-style fantasy world, with fantasy-Arabic architecture, deserts, dress and magics, ruled over by the "extremely pretty" and tyrannical Princess Kupacius. The kingdom saw a technological advancement when Doctor Robotnik, briefly transformed into his original Doctor Kintobor form, arrived and began introducing innovations such as redesigning the kingdom's plumbing system.
The planet also possesses Zones based around other fantasy genres, such as a forest populated by medieval-style knights and an area much like Ancient Greece which was once plagued by the powerful Medusa. It also possesses a very technologically advanced Zone that takes place in the brutal Space Races, where racers are blackmailed into acting as champions for their planets in a race on an asteroid belt.
Shanazar was also invaded by the plastic alien hive-race known as The Plax, who devastated Shanazar with earthquakes caused by their mining operation.
The Mystic Mountain
The kingdom of Shanazar's security was ensured for centuries by a pact made with the Genies of the nearby Mystic Mountain. Every few years, a number of small children would be sent to the Mystic Mountain to have the spirit of a Genie placed inside their body. This would enable the Genies to leave the Mountain, and for five years the child would be able to summon a Genie (in a more solid form) and command its power in defense of the kingdom. The stress of containing this power would cause the child to die after those five years and the Genie would become a truly free being, and for that time the child would be treated like royalty.
This practice was ended by Sonic the Hedgehog, who took moral offense at the idea of the child dying within five years and destroyed the Mystic Globe which made it possible. It is unknown what happened to the Kingdom of Shanazar without the Genies to defend it.
Union With Mobius/Time Zone
In order to return to Mobius, Robotnik (with help from Grimer and Nack the Weasel) developed a Dimensional Blender device that would enlarge Shanazar until it occupied the same space as Mobius, merging the two planets together; the resulting chaos and destruction would make it easy for Robotnik to take over. The device merged the worlds together but Mobius was left unharmed, with the Zones from Shanazar being added to the planet and accessible via dimensional portals. As a side effect, gateways to alternate dimensions and planet Earth (at any time and any place) were opened, and Sonic spent the next few issues exploring the New Zones and various times on Earth.
In an interview, Lew Stringer said he wrote this story ("Worlds Collide") after the editor asked him to end the Shanazar story: this both returned the strip to Mobius, and (via the New Zones) meant there could be new situations and villains. He explained the New Zones imported from Shanazar "exist in a pocket dimension, and can only be entered via various portals (of which the Eternity Ring is one). So Mobius has been redesigned, in the same way a computer is upgraded, but still operates the same way albeit with extras. There you go - clear as mud!"
Nigel Kitching revealed on the Sonic the Comic Yahoo group that Shanazar was originally intended to not be a separate planet (or even called Shanazar, that was meant to just be the name of the Kingdom) but Mobius in the ancient past. Sonic would discover this when running into an old-fashioned version of the Drakon Empire, who would invade the planet and be opposed by the ancient Echidnas led by Knuckles (much of this was reused in STC's Sonic Adventure adaptation).
When only the Sonic strip in STC was left non-reprint and was divided between two writers, Nigel Kitching revised his plans and introduced the mercenary group Death-Trap. The idea behind this was that they would pursue Sonic, who himself would be pursuing Nack, and lose him after each story; this would enable Kitching to do his own plans and backstory while ensuring Lew Stringer was able to write what he wanted without being restrained. When he was fired from the comic, however, these plans went unused.