These days every one finds internet as a Web Market in which every thing is for free it may be Black hat(Warez) or White hat(Free games). That is Internet is turned up in into a Piracy Hub. But still there are sites which are completely legal like http://www.youtube.com but majority of them are P2P that is Illegal/Legal(It is still a controversy).
Napster was the first sharing thing(P2P) in the Web2.0

It was created by Shawn Fanning when he was in Northeastern University in Boston. He created the Software for Audio/Mp3 sharing and circulated to some of his friends. Those friends again circulated to their friends and it went on and on and soon within 1-2 week it was found more than million people were using Napster. Its aim was ‘ You give me a song and I will also give a song ‘
It grew popular and popular but the major drawback was that it was against ‘ Copyright Violations ‘ it was said that during Napster time the Music stores were vacant and everyone preferred to get Music through Napster. It was easy and also saved money. All the music companies were annoyed by Napster there sales went down due to Napster.
But Napster time was ended in July 2001 when Metallica (A famous heavy metal band) cased because its song “I disappear” was leaked before it was released, also Madonna’s singles were leaked which annoyed her.
In 2000, A&M records with several other recording companies sued Napster for contributing to copyright violations of US Digital Millennium Act (DMC Act) The music companies made the following claims against Napster:(1) That its users were directly infringing the plaintiff’s copyright;
(2) That Napster was liable for contributory infringement of the plaintiff’s copyright;
(3) That Napster was liable for vicarious infringement of the plaintiff’s copyright.
The court found it guilty for all of the above and it had to be shut downed in July 2001 and was declared bankrupt in 2002 .
The company still has website http://free.napster.com/
Soon after Napster a video exchange site was launched which was
http://www.youtube.com

Youtube.com is a Video Sharing site started somewhat in 2005(February) by Chad Hurley, Steve Chen and Jawed Karim who were employed by PayPal at that time. Hurley studied design at Indiana University of Pennsylvania, while Chen and Karim studied computer science together at the University of Illinois at Urbana-Champaig. It was somewhat influenced by Napster(which was Audio sharing) and provided with Video sharing Napster was soon closed within 3 years. Youtube wasn’t closed because it was supported by Google.com which was a strong player in the internet field and backed You Tube. Google took over You Tube in 2006.
It is said that the two developers developed You Tube as they were having big problems in sharing videos with their friends.
You Tube is now the biggest Video Sharing website having the Traffic Rank of 3 and there are many small sites like metacafe.com which also offers Video Sharing. There is also a Flag community in You Tube which regularly remove violated contents.
Earlier people were using Software’s Like Lime Wire and Ares too much for downloading stuff but they bad content Bad Quality content so they moved to Torrent’s and HD downloading Software’s like Vuze. But these days the leader in Piracy are Torrents which is not yet termed as Illegal yet. But sometimes we are dragged to use these thing, For a instance a Movie came few time back called “Slumdog Millionaire” this movie was based on India but was released few months after getting released in Foreign market there were no signs of the movie’ s DVD to be coming. So people getting annoyed by the late release proffered to download it and watch it. This is not the only case the same happens often with Song’s, Movies and Warez(Software,Games). Torrents are not termed illegal as it is P2P which stands for Peer to Peer.