THE CODA ENDING
"I had always thought that it was important to show that their efforts, the sacrifices made by Terminator and by Miles Dyson, were not in vain and that history was changed" - James Cameron T2 Illustrated Screenplay 1991
James Cameron's story had ended in Terminator 2: Judgment Day. Designed as the conclusion of the story and publicly advertised as such, it has been undoubtedly considered the undisputed end of the saga for many years. As oppose to most other sequels which are usually an afterthought after the original movie has been a success, T2 has always been a part of the story since it's inception. The Terminator and T2 form one, single and complete story, which, because of many factors, had to be split in two.
James Cameron: Together, "The Terminator" and "Terminator 2: Judgment Day", comprise a single, complete narrative
When Cameron created his story, almost all the elements from T2 were already there, from good T-800 befriending little John, along with the second Terminator, T-1000, being sent after the T-800 had been defeated, to the prevention of the nuclear holocaust. You can read about it in in details on The Complexity of T2 page in the first section titled "The story was there from the beginning" - http://www.jamescamerononline.com/T2Complexity.htm
As Cameron explained, he simplified the story but still left some of the T2 subplots intact. In the script of The Terminator, during the bed talk, Reese mentions that there is a possibility that the machines had sent another machine and cautions Sarah to be careful in the upcoming years. He also tells her in the movie that the future is not set, and in the deleted scene Sarah does find Cyberdyne's address and pursues Reese into destroying it thus stopping the future. The pipe bombs that they construct in the motel are for Cyberdyne
Cameron's Terminator story is the story of Sarah Connor and her character arc, which ends with a full circle. We meet Sarah as a clumsy waitress who's kicked around by everyone and who has no one but her mother and good heart with strong moral compass. We then see her transformation into a toughened warrior and a damaged, hurt human being who carries too much pain to the pain she becomes like an actual machine losing her humanity, motherhood and morality. At the end, she regains her humanity and heart, and also comes full circle with the Terminator - Sarah kills the T-800 the same way she did in the first film, by pressing a button, although this time it's grief. James Cameron: We wanted (T-800) to change, and we wanted Sarah to change; she starts out one way, becomes fixated on that, ends up becoming more of a machine that he does. We wanted the two of them to change characters as the film went on: she becomes the Terminator while he becomes a human being. And it's partly through the Terminator's transformation that she understands what humanity really is.
Since T2 was simply a completion of a story and the main character's emotional/character journey, it has been designed as the end of the saga from day one.
James Cameron: "Terminator 2 brings the story full circle and ends it" (Starlog #170, 1991). "Terminator 2 is the absolute conclusion as far as I'm concerned. (...) By the end of Judgment Day we've basically rewritten the underlying foundation of reality as we know it." (Starlog Yearbook #9, 1991)
Arnold Schwarzenegger: " I know Jim rules out a third film" (Starlog #169, 1991)
Everyone connected with Terminator 2 insists that this will be the last Terminator (Starlog #169, 1991)
Linda Hamilton: "I thought it was perfect with two films. It was a complete circle."(wharf.co.uk)
The conclusion of the Terminator saga - The narrator of the official The Making of Terminator 2 about T2
To present a satisfactory coda ending to the story, the scripted and shot ending shows an outcome of Sarah's, Dyson's and the T-800's sacrifices. It shows that the nuclear holocaust has been averted and that Sarah and John lived "happily ever after". John started a family and became a senator, while things have turned out bittersweet for Sarah. Seemingly happy grandmother who puts on a "everything's fine" face, she's still haunted by the past that already doesn't exist. Her feelings also remained true to one and one man only, who she knows will never exist and she will never see again. In the novelization, Sarah hired a private detective to find Kyle Reese in this altered, war-free future but he couldn't find him and Sarah eventually called him off. It's very likely that the chain of events that led to Kyle's birth in the original future didn't happen this time around. Remember that Kyle said that he grew up after the war in the ruins. With no war it's possible that his parents haven't even met. The ending also features the recurring motif throughout the film which is a playground
James Cameron: The Future Coda was really meant to be kind of a bookend scene to the opening scene where we see the playground, future, the 2029, it's blasted, then we see the same future, same playground, same date, but it's fine. So , it worked, the idea that you can change the future, we get to see that yes, that can happen (More Than Meets The Eye 93 featurette)
But weren't the events of T2 predestined as well since in 2029 John had sent the T-800 back right after Reese to protect himself in the past from T-1000? To a certain point only. According to the novelization (written by very close, life long friend of Cameron who was also involved in both Terminator films), the events of T2 were predestined up to the point where the trio arrived at the Salceda Ranch. In the predestined timeline, the trio went down South as planned and waited the war there. In the events shown in the movie, what was different this time was that Sarah had the nightmare at the ranch which made her decide to change the future and kill Miles Dyson, hence the alteration in the events from that point on. Whether a divine intervention or something else, the dream did not occur before
T2 Novelization: "He [John Connor 2029] knew a lot of what would happen, but past a certain point in his memory, he wasn't sure of the outcome. A knife embedded into a weathered picnic table with the words NO FATE carved in them was the dividing line between what he knew had happened and what might happen. His very existence could be erased."
For the scene, the futuristic buildings were designed by artist Steve Burg (who designed extra details on machines already designed by Cameron from the first film and who also designed some of the new ones) and incorporated into the skyline in a matte painting by Mike Pangrazio. Burg designed the future look so it fits stylistically with other designs in the film. Below, the design sketch of the futuristic horizon.
Academy Award winning Stan Winston and his team provided the makeup effects for the 64 year old Sarah. The story goes that Cameron did not recognize Linda Hamilton and thought that Winston had brought his grandmother to the set. Picture below from The Making of Terminator 2: Judgment Day 1991 featurette of Stan Winston sculpting the old Sarah's face himself.
There has been numerous reasons cited as to why the scene was removed. The ending was removed literarily at the latest possible time to do so (2 days away from having to print the film for mass prodction), thus still remaining in many T2 related tie-ins. None of the reasons related to the fact that John still exists - The Terminator saga has been very grounded, and people do not disappear magically like in comedies such as Back To The future. There are no physical actions or chemical reactions that would cause something to evaporate magically for no apparent reason. The cause might've been removed, but since it was removed after the effect, the effect is obviously and naturally still a present physical matter.
James Cameron: I asked myself a hypothetical question: what if you could you grab a line of history like it's a rope stretched between two points, and just pull it out of the way? If you can pull it just a little bit out of the way then cut it at that moment, maybe you could change it and history could go in a slightly different direction. Like the catastrophe theory. If you could actually do that you would get a future that no longer exists except in the memories of the people who are here now. They have a memory of a future that will never happen, which is curious, because it defies our Newtonian view of the world. But couldn't it be possible? That became my point of departure. It's like the Terminator is an anomaly of our time because he's the only one who has memories of a time that will never exist. His particular future does not exist anymore.
One of the most cited reasons is the visual and tonal contrast with the rest of the film. The scene was too happy looking and had a different feel that the rest of the otherwise serious R rated morality story.
"On a visual level, the sunny park in Washington and the futuristic buildings felt again out of place (...) The decision to maintain a sense of narrative ambiguity - to leave the future open ended - felt more in keeping with the tone of the film." - Van Ling (T2 creative consultant), T2 Illustrated Screeplay 1991
"Perhaps emerging from the dark industrial inferno of the steel mill into the bright idyllic sunshine of a world delivered from peril was too dislocating, and seemed to be a scene from another film" - James Cameron 1991 T2 Illustrated Screenplay
"It was somehow tonally unconnected to the rest of the film" - James Cameron T2 audio commentary 2003
Another reason was that it wasn't necessary to spell out that the story ended happily, and the audience could obviously get it from seeing the story itself, without having had to be literally shown the war was prevented
"Perhaps we just sensed that everything that needed to be said had already been said" - James Cameron T2 Illustrated Screenplay 1991
"I felt it was unnecessary because people just naturally felt that the battle had been won" - James Cameron T2 audio commentary 2003
Cameron also didn't feel like the old Sarah worked - "It was shocking to see Linda suddenly old and I really realized something about age makeup, if you're gonna sell age makeup you really gotta start at the beginning of the film so people are used to it and they can accept the character. Otherwise what they see is the actress that they've seen for 2 hours 20 minutes suddenly with a bunch of rubber on her face and it doesn't really work" - T2 audio commentary 2003
"on a perceptual level of the characters, it was difficult to accept Sarah as a contended old observer after seeing her throughout the film as an intense, athletic heroine" - Van Ling, T2 Illustrated Screenplay 1991
Lastly, Cameron concluded that something else might have gone wrong along the way in those 30 plus years, and knowing human nature, even if the war and Skynet was wiped out from existence, it could have been something else - "I began to think that the message of the film might be better served by not letting the audience off the hook so easily. We decided not to tie it up with a bow, but to suggest that the struggle is ongoing, and in fact might even be an unending one for us flawed creatures trying to come in terms with technology and our own violent demons. So my final writing on T2 came less than a month before release, with the voice over narration which ends the film" - T2 Illustrated Screenplay 1991
The coda ending remained in the novelization and various video games
James Cameron: I'm not
involved in T3. When I was in post on Titanic, I was approached on that. I said,
"I'm just not that ... Ahhh, I mean, I told the story." I mean, the reason here
to make the film is to cash in on the success of the franchise. I think films
should be made from an organic place of 'I have a specific story to tell now I'm
gonna figure out who's ready to pay for that.' It was 18 times harder to get the
money to make Titanic than it ever would have been to make another Terminator
film because that was a proven commodity, but I was much more interested in
Titanic and I think that's the way films should be made.
James Cameron: At a certain point, I think I was finishing Titanic at the time and I just felt as a filmmaker maybe Iíve gone beyond it. I really wasnít that interested. I felt like Iíd told the story I wanted to tell. (Collider 2014)