Watch: Superman Cancelled Open World Video Game Recap
Developed by Brash and Factor Five, inititally the game was going to be attached to Bryan Singer's sequel to Superman Returns; however, when Singer went on to do Valkyrie instead of the sequel, WB decided to reboot Superman and wait a few years, which hurt the development of the game. Further details are included in the video.
Below is also some concept art and images related to the game, which looked pretty awesome by the way as the developers were keen on getting Superman's game controls right.
It's currenty speculated WB may be working on a new Superman game and/or a Justice League game as WB Games is presently working on at least two DC games.