Levelling Up Materia
I'm going to let you in on some of the best tips for the coolest Materia combos and chains in Final Fantasy VII. To start with, you need to know the best place to level up Materia in FF7. This would be down the left path in the N. Cave, where you get Magic Pots (you'll need to be on Disc 3...if you want to know the best place for Materia levelling on Disc 2, I recommend the Mideel Area...). Fighting the Magic Pots will eat up Elixirs so make sure to use the W-Item cheat. Each Magic Pot gives you a huge 1000 AP for your Materia at the end of the battle. In addition, in this area you can also fight Movers, which give you 2400 AP after fighting the standard 3! Even better than 2 Magic Pots.
You'll definitely want Cloud to equip the Triple Growth, 3 slot Apocalypse sword. Apart from this, I recommend using either 8 slot Normal Growth Weapons or 4 slot Double Growth Weapons. It averages out to the same. For Armor, use either Wizard Bracelets, Precious Watches, or Double Growth Rune Bracelets. Cid's 2 slot, Triple Growth Scimitar may seem interesting, but in actual fact 3 multiplied by 2 slots is less efficient than 1 multiplied by 8 slots. But if you want more focused levelling, by all means go ahead. Personally, I prefer to use Cid's very efficient 5 slot Double Growth Weapon, the Javelin.
Huge Materia, Master Materia & Mastered Materia
The Huge Materia stored in Bugenhagen's planetarium in Cosmo Canyon are very important. This is because you need them to get the Bahamut Zero Materia, and multiple Master Command, Master Magic and Master Summon Materia.
You need to have mastered at least one of each Magic Materia to exchange for the Master Magic at the green Huge Materia, and at least one of each Summon Materia to swap for the Master Summon Materia at the red Huge Materia.
The advantage is that then the Master Magic gives you every single Magic spell in just one Materia, while Master Summon gives you every Summon spell in one Materia - all of which you can cast an unlimited number of times a battle (compared to casting a max of 5 times with a regular mastered Summon Materia).
In order to get the Master Command Materia, you must swap 7 different mastered Command Materia at the yellow Huge Materia. To get the Bahamut Zero Materia, you need to have Bahamut and Neo Bahamut Materia and then the blue Huge Materia will give you Bahamut Zero.
Advanced Materia Combinations
All right, let's get onto some of the interesting combos.
If you have the patience to master the required Command Materia and exchange them for Master Commands in Bugenhagen's planetarium in Cosmo Canyon, you can have a lot of fun playing around. See Double Cut and Slash-All won't have any extra effect if linked to Support Materia. But there's a little trick - you can link Master Commands to Support Materia and it will affect your regular Attack, including Double Cut or Slash-All. You can have 4 Master Commands in a chain on one character, one each linked to HP Absorb, MP Absorb, Added Cut and Steal As Well. This kind of maxing out our powers is exactly what we're aiming for.
TIP: Make sure you collect all the Enemy Skills! A mastered Enemy Skill Materia is almost as powerful as a Master Magic Materia.
Another nice Materia trick is to stick Hades-Added Effect into your Weapon and also equip a Mega All Materia. Even if your level is still quite low, getting through weak to medium enemies will be a breeze as these enemies are likely to be affected by at least some of the statuses Hades inflicts.
Here's one of my favourite combinations. Match up multiple mastered Counter Attack Materia on one of your characters and also throw in a mastered Cover. You'll counter multiple times every time you get hit, and because you have a mastered Cover you'll be hit a lot! Cover plus 15 mastered Counter Attacks starts to make 4x-cut look a little puny...
Another nice one is to link a mastered Comet Materia to a mastered MP Turbo and a 2nd mastered Comet Materia to Quadra Magic. The MP Turbo will help raise the damage from each hit of Comet 2. Then equip a W-Magic. Comet 2 consists of 4 continuous hits so with Quadra Magic you're looking at a chain of 16, then with W-Magic a chain of 32...
Finally, of course, is the classic Revive-Final Attack or Phoenix-Final Attack pairing. These allow you to auto-revive upon dying, and are equivalent to Life 3 (or perhaps Life 4) in other Final Fantasy games.
Absolute Most Powerful Materia Chain
Want to know the theoretical most powerful Materia combination in Final Fantasy VII? Read on. Equip Cloud with a Master Summon and W-Summon. Make sure his Magic stat is raised to 255 using Magic Sources (you can morph to get them in the Sunken Gelnika). Then fill out the rest of Cloud's slots with Mime-Counter. The Counters should all be mastered. Then give your other 2 characters 8 Mimes-Counters each, and make sure their Magic stats are also at 255.
The idea is this: Cloud uses W-Summon to summon Knights of Round twice. Then let's say immediately afterwards the enemy attacks all 3 of your characters at once. You would respond with a huge, 23-long chain of W-Summoning Knights of Round. Because everyone's Magic stat is at 255, you'd be taking off either 9999 or very close to it with each hit. (You can guarantee taking off 9999 with every hit if you alternatively put in the Master Summon with MP Turbo. This raises the MP used by KOR to 255, and any magical attack using 255 MP is guaranteed to hit for 9999, with one exception: against Ruby Weapon. But it means you lose one Mime-Counter slot, so I don't think it's worth it).
23 W-Summons gives 46 KORs total. Each KOR hits 13 times, so you're looking at 46 x 13=598 hits. Assuming they're all at or close to 9999, and you're attacking for just short of 6 million HP. I have to admit, the other combos on this page I've all obtained, but not this one. Mastering all those Materia would be a gargantuan effort, and it's huge overkill even on the Weapons.