Captain Marvel was bigger in the past. When he was first created in the 40's or 50's, he actually belonged to a different company. He was actually so popular back then that he even outsold Superman for a while.

But DC sued, claiming he was a ripoff of Supes. The thing is, they're actually pretty wildly different in the details: for example, Captain Marvel is a child who turns into a super powered adult by saying a magic word. But based on the character's look and powers, the court ruled in DC's favor. Mind you, this was back when being a strong, flying guy in a cape was unique. Now that's half the characters in comics and you can create as many rip-offs of Superman as you like without getting in trouble. Marvel has at least three different direct homages to/parodies of him, lol.

Then DC bought out Cap's company and acquired the character. They decided they wanted to add him to their universe, but never did anything particularly noteworthy with him until, like, the 90's (though he did have a TV show in the 70's, so anyone who remembers Wonder Woman mainly for the Lynda Carter show might remember him from that as well). So that's why most younger people these days have never heard of him.

Captain Marvel is the very definition of iconic!

That probably won't help his chances for appearing in Injustice, not in these times, but the character is a bonafide classic -- the superhero's superhero! Clearly a little mystifying to a generation told to burn its history, but an undisputed icon, arguably at his best as a living contrast to the times. If your only frame of reference was MK vs DC, you're not gonna get the full weight of it.

There's a hoodie New 52 version that might pop up. Could be interesting if they swirled some Kingdom Come references in with the Gods Among Us plot. It's probably just as likely we get Black Adam, though. Can't complain about that, if it happens.

Like Mick-Lucifer said, as similar as he appears to be to Supes, he is actually quite different. I really commend the MK Team for including him in MK v.s. DC. With only a 10 character slot, they added him anyway, and he brought a great deal of versatility on many levels to the overall roster. I hope they do so again.

Well he's kinda IMO expected; and Black Atom could also play completely different. Same for Sinestro getting in along with Green Lantern; they're both kinda expected.

He probably is iconic to an entire generation, but outside of knowing of the Marvel's Captain Marvel, I had no experience with this character until MK vs DCU

To be fair, I doubt any of us are that close to the character.
If you're talking association by generation, you're really talking readers of the forties and fifties. RazorsEdge701's post recaps the decline from top tier to bit player (and the reason for misidentification and co-branding as Shazam), but that decline arguably is part of what secured the iconic status of the character.

Some of DC's use of the character was more along the lines of what MK vs DC players might interpret, the sense of trying to integrate the superhero element, emphasising the gimmicks and dressing that would distinguish him from power rings, or super speed, or golden lassos, etc. That said, for a while there, not too long ago, the descending wisdom was to embrace the distinction of the character as an iconic representative of his time.

For the most part, the impact of the lawsuit and decline in penetration removed Captain Marvel from the times, avoiding major shake-ups that altered active top brands in later decades. The eighties certainly took a glancing blow, using the contrast of an innocent character confronted by a harsh age of violence and consequence -- but that ultimately strengthened the opposite idea.

The gimmicks and details separate Superman and Captain Marvel just fine -- wizards, trains, magic, lightning, etc -- but that relationship with the times really helped define differences between Superman and Captain Marvel that were much more special. Superman never went away, and like most major corporate properties, was changed by the present. Even if the golden rules of truth & justice through steely might stayed the same, Superman had to respond to the world around him. Captain Marvel therefore became a living throwback. A character of vintage simplicity, innocence and magic -- sometimes to the point of being drawn [or animated (for reference)] with squinty eyes and the barrel chest.

If Superman had to be weakened to satisfy modern readers and burdened with psychological anguish that some perceive as the defining factor of the superhero ages post-Silver, Captain Marvel would become even more invincible, even less burdened, with more iconic chest and chin than ever before.

Today, in a DC New 52, the character is arguably more tangled in the times than before. Relegation from revamped starring character of the retro interested nineties, to beloved recurring guest character in the 2000s, allowed that idea of the living vintage to carry on. With the New 52, the times may have caught up with him. If there's a generational burden, this may be it, but it's too soon to say for sure. What you can say, of course, is that Captain Marvel, at his best, will always be as iconic as they come.

Shazam: iconic, Captain Marvel: not so. Oh wait...
I've got to say that I wasn't aware of Captain Marvel before MK/DC either. He must've been more-or-less an exclusive to the Americans, and Superman – who is pretty much the "USA representative of DC" – on the other hand is more global. It's a lot about how well they're marketed.
Taking the whole long past and the present into account, I don't think that Shazam is close as popular as Batman, Superman, Spider-Man, Iron Man, The Joker, Lex Luthor, Green Lantern, Deadpool, any of the heroes in The Avengers or many of the DC and Marvel villains at the moment.
While Shazam was the competitor of the good ole Superman back in the days, I don't think that people will buy him solely because of that. I'm not aware of all the recent retcons made but with more original characters like Spawn, Deadpool or even Hellboy of today, Shazam's chances are rather slim of becoming well known unless they'll come up with a kickass movie for him someday. He'd unlikely reach the Batty/Supes/Spidey status.
The word "iconic" has been rather frequently used by the MK fans after Ed Boon said that in an interview about the then upcoming roster of MK/DC in 2008 by the way.

Captain Marvel was almost, if not as big as Superman in 1950s and 1960s America. His appeal was that he was a boy who became a super-hero which attracted kids, his major flaw was that he was as big if not a bigger "boy scout" than Superman. And as the 1960s ushered in the age of Marvel Comics, the character just became out of touch. And as comics became darker, Batman became the Dark Knight, Green Arrow became an Activist, Green Lantern was accused of Racism, but Billy Batson remained Billy Batson; that good all american boy, which wasn't appealing anymore. He still has a loyal following here in the states, but nowhere near what it was in the Gold and Silver ages.

I think it's a given that if you aren't particularly interested in a topic, you're probably going to have pretty big gaps in your frame of reference. As it happens, the character has had a strong enough legacy to remain relevant and recognisable to anyone remotely close to the medium, or subject. That's addressing the lowest common denominator, though.

Captain Marvel has been in cartoons and TV etc, which did and has exposed the character to interested people across the world, even if that isn't really the measure of the iconic qualities. The point of the years of disconnection was that they maintained what was iconic about the character -- in much the same way any enduring icon of a bygone time is eventually sustained by that legend. Elvis Presley is an iconic figure, sustained through time, who just happens to be part of the Captain Marvel legacy, having famously worn outfits inspired by Jr.

Until recently, DC comics was a very worldly, nostalgic place, keeping that legacy alive. That may or may not be changing, but the present is still but a blip in a long history.

I've always hated that fuckin' story. I have no idea how it got so goddamn famous being that poorly written.

"Hey GL, how come you save other planets but you don't do anything for black people? ARE YOU RACIST OR WHAT?!"

Oh gee I dunno, Green Arrow, he probably saved the Earth from a meteor or an alien invasion or some shit just last week, there are some fucking black people who live on the Earth, aren't there?

Fucking stupid Denny O'Neill and his stupid fucking strawman arguments.

The line about the skins is great. Come on. It might be what the story lives and dies by, but it's a great line.

It's not a great line because it doesn't make any sense. It's not like Hal flies around Earth spotting crimes and only stops to save them if they're white people. He does exactly the same thing for the "brown skins" that he's done for the "purple skins" and "orange skins" all the goddamn time: he saves their fucking planet. Thanks to him, they're not dead ten times over. Gee, what a terrible racist. It might have been a good scene if Hal had a fucking answer for the dude, but just standing there and hanging his head like "Huh, I guess he's right"? Seriously?

Y'know, O'Neill was a legend, he was great like 99% of the time. Dude wrote or was editor on pretty much all the best Batman stories ever, he created Ra's al Ghul, I respect all that. And wanting to write a Green Arrow book about Ollie's liberal politics, that's a cool idea. Dude's the Robin Hood of the DCU, he should stand for the little guy. But he clearly did no research on GL and just went "Well gee, I need to have a stuffy, boring conservative partner for him to argue with and constantly get the better of, who's "the man" he can stick it to in the DCU? Oh I know, the space cop!" Because even in the 70's when comic book characters were still pretty shallowly written, Hal Jordan was kind of a rebel, dude used to argue with the Guardians and quit or get fired from the Corps every couple years. He's not really "the establishment" at all.
And that, a guy that good not doing his homework on a main character before writing him, I don't get.

I've never really been a fan of DC Comics, or comics in general.

The only DC superhero I ever liked was Wonder Woman (shut-up, it's not gay), and all the other DC characters I like are villains, mostly Batman villains.

As for Captain Marvel, I don't like the idea of a little kid digivolving into a six-foot tall buff dude, especially one in tights and a cape.

Well you gotta take into account that superhero comics originally were (and some would say still are or at least should be) for kids. Captain Marvel is a wish fulfillment fantasy. What 10 year old boy doesn't want to instantly become a grown-up and get to fight the bad guys?

Subjectivity has probably always its share to an extent whether you're from North America or Australia in determining a comic book character iconic; Shazam has had a notable past in North America and he was chosen to MK/DC for being the representative of a comic book to get the roster as diverse as possible yet e.g. Robin could've been more viable otherwise.
What makes a character iconic in the first place? Is it the legacy, all-time popularity or how people view them in the present? The present must matter considering the question is asked in the present tense after all. Still it's not only a matter of the present but a matter of generations already.
I knew about his rather strong past beforehand: I had read a Wikipedia page of him and some other stuff soon after MK/DC. Personally, I don't find Cpt. Marvel very iconic, I don't think he's been iconic aside his fan base for decades – while he probably was that in the past – but Shazam could recover that status in future with enough establishment and funding.

This is also one of the prime reasons why Captain Marvel isn't that special in the eyes of the comic book readers today. He appealed to the kids of the 1940s but is overshadowed by the more recent, developed and more exciting comic book characters of the 2010s. The availability is ridiculously more diverse and developed nowadays and not many children would choose reading Captain Marvel over more appealing characters like a whole lot of the Marvel characters and DC characters such as Superman.
The key for Shazam's triumph must've been the children who fantasized being him but I'm not sure if children are all that wishy anymore with the Internet and modern education with what they'll learn the sad truth that "I'm not Shazam anymore and Santa is not real!". The comics are sort of more evil now as the globe is calmer war-wise. Cpt. Marvel has a respectable past but he isn't iconic IMO, he was iconic and he could possibly regain that one day – he is not a saint but a historic contender for Superman. He was the hero of a time, there will probably be a new trend for the comic book audience every few decades that's "in" for that specific generation. He does appear stunning but could he contest e.g. Batman himself?
(Maybe the DC developers want to keep Shazam nicely in the middle as well whereas Superman remains atop. Kind of an ego thing possibly.)
Ed Boon entitled Baraka "iconic" when he stated that each side in MK/DC would have around ten iconic characters. I don't consider himself an icon but one could. It's in the eye of beholder. If Captain Marvel is an idol of yours, he's probably iconic to you too. Being `iconic ́ / = / Being the best.

Well let's not forget that when talking about MKvsDCU's roster, they only said MOST of the characters would be iconic and there would be a couple surprises. That's how Deathstroke got in.

And I believe CM was on the roster specificially because Boon has admitted that's his favorite DC character. Though an argument could be made for CM's iconic-ness, given the favoritism artist Alex Ross has shown him over the years, particularly in Kingdom Come, and Ross's work being so famous over the past 10 or 15 years. KC is probably up there with Watchmen and Dark Knight Returns on the most famous/best selling graphic novels list.