*FUNGAL INFECTIONS*
Spores are everywhere, and fungus in the tank is no exception. Fungus has an important role in aiding the decomposition of dead fish and leftover food. However, fungus could be a serious threat to fish with injuries and bacterial infections.
Hence: NEMO HAS FLUFF WHERE HE DID NOT HAVE FLUFF BEFORE 
There are a few fungal diseases that apply to freshwater and saltwater aquarists, alike.
The three most popular are Saprolegniasis, Branchiomycosis and Icthyophonus.
Saprolegniasis often has a few different molds, incuding Saprolegnia and Achyla. It is easily identified by the tufts of fuzz protruding from fins, gills, eyes and can even be found on dead fish eggs. It will attach itself to an injured fish with an infection or compromised slime coat because of water conditions. By the time the hobbyist sees the little balls of cotton (often called Cotton Wool Disease), the mold already has its claws into the flesh of the fish. This is why some experts discourage the use of dyes (e.g., Methylene Blue) as possible treatments. Methylene Blue will not be able to penetrate the infected area enough to be of much use.
Branchiomycosis, AKA gill rot, is characterized by heavy respiration and gasping for air at the top of the tank. Gills may appear striated and pale in the infected areas. This is often associated with gill flukes.
Icthyophonus is like Mad Cow Disease for fish. It is caused by cannibalism and from ingesting infected feces. Unless you have a tank with the high temperature of 68 degrees or below, you probably will not have to worry about this one. This fungus is internal from the nature of its transmission. For a more detailed description on Branchiomycosis or Icthyophonus, read the link University of Florida link provided in suggested reading.
How does this happen?
Conditions for a fungal infection are easily identified by checking your water parameters. Poor flow, excess nutrients, overfeeding and too much general decay in the tank can cause problems in more areas than fungus alone. Injuries caused by aggression or ammonia spikes during cycling can also encourage fungal infections.
Treatment
Like many things in the hobby, most organisms we do not want can be controlled by providing a decent environment. You cannot get rid of fungus in the tank, it will always be there. If you believe that you have a fish with a fungal disease, or symptoms of, check your parameters and make necessary adjustments. If you find that infection is caused from an aggressive fish, it might be time to rethink your stocking strategy. Treatment is a quarantine tank will be necessary. There is a wide array of treatment options. I would not endorse one over the other. Some authors suggest Methylene Blue, Formalin, copper or sticking strictly to anti-bacterial medications (sulfonamides) such as Furanase, or MelaFix, PimaFix and Maracyn.
The problem with treating is that most experts are convinced that the regular hobbyist would not be able to identify a fungal disease if it slapped us in the face.
More than likely, we are looking at a bacterial infection, which would not need aggressive treatment. Instead, a little R & R in the QT with an anti-bacterial treatment would suffice.