Wow, this debate is really going in circles.
Here's what I think. Kazzaa and Napster and all the other services of the kind are distibution methods, just like the radio. The difference is, the radio stations pay royalties to use the songs they play; Kazza and Napster users rip the songs themselves from CDs or other sources and distribute them without paying royalties. Radio stations make money from selling ads or by listener donations; Kazzaa and Napster users don't make a dime (nor do the people who own the software). So, in essense, when a song is played on the radio, you can listen to it for free, but everyone else in the chain makes money; when you download a song for free, you still get the song for free, but nobody makes any money on it.
This is the whole problem that RIAA has with file sharing. In their view, the only profits they see are from the sale of the one CD where the music originated. Beyond that, an infinate number of copies can be made and distributed without the artist or record company seeing a dime of that money. After all, who in their right mind would pay for a product that they could get for free off the internet? And what company in their right mind would continue to make a product that could be distributed for free via the internet? In essense, this is a case of supply outweighing demand and driving down prices and profits.
While the RIAA arguments make sense, there's also the matter of inflated CD prices and proliferation of bad product on the market. I can understand a consumer's frustration at paying $15 for a CD because one or two songs off of that CD were played on the radio and sounded good--lables always release the best songs to radio. $15 for a CD with two good songs and 10 bad ones is a bad purchase, and you can't take that CD back once you buy it and listen to it. The Internet gives you a chance to download the whole album, if you want, and listen before you buy. But, what's to say that a person will even buy the album if they already have all the songs on their computer?
The flip side is that the Internet gives consumers the chance to sample music that isn't played on the radio. Often, these consumers will buy a CD that they otherwise wouldn't.
As for the laws, it's my understanding that you're allowed one electronic backup copy of any song, video game, etc... for every original, copyrighted version you own. If the copyright holder has granted permission to distibute files (as many artists do on mp3.com, musicclick.com, and other such services), then you can have as many copies as you wish.
So, is it a sin? I think that goes back to the intent in your heart. If you're downloading music because you don't want to buy it, then isn't that the moral equivilant of theft? Don't shoplifters steal because they want something but they don't want to pay? Perhaps it's more closely related to the receiving of stolen goods--you're getting a deminished quality version of the product at a reduced price (no box, no warranty, possibly scratched up in the case of physical goods; reduced sound quality in the case of mp3s).
I had a lot of music on my computer that I'd downloaded over the years, but when I got involved in church recently, God laid it on my heart to destroy those files. I didn't do it because I was scared of getting caught, I did it because I was scared that I was sinning and desensitizing myself to sin by doing it.
Another thing to remember, from a practical standpoint, is that Kazzaa and a lot of programs like it have spyware, little programs that are imbedded into the application that report back marketing data to some congomorate. Kazzaa even had some program in it that would "steal" CPU time from user's computers to perform tasks for clients. These programs can eat up a lot of system resources, so beware.