I think it's like this: When you buy a cd, cassette, eight-track , you were able to make a copy for your own use. Because it was impossible to track if you gave copies to friends, there was a surcharge added to the price of blank recoding material to compensate for bootlegging.
In the digital age, it's a little more complicated because bits, etc. are not physical properties. When you encode a song, there is no material product, only information, so the issue becomes not about material theft, but of theft of intellectual property (not just the music, but the code of the mp3, etc.). As it currently stands, if you copy music and share, you are not breaking laws against material theft, but violating COPYRIGHT laws, meaning that the original author or composer has exclusive rights to the copy and distribution of the material, and any sharing must have their consent.
You'll hear a lot of debate over this issue, the most cogent so far being that of Alvin Toffler (author of FUTURESHOCK, current book REVOLUTIONARY WEALTH), who makes the argument that information, unlike material goods, is not diminished when shared, and that it actually creates new wealth because other people can now expand on that knowledge (think open source software like Linux.) There's still the moral issue, such as, should a composer turn a blind eye if his music is sampled in a violent rap song that he disapproves of? That's getting a little beyond your initial question, but it's all related. There's a lot of debate legally on this, but current laws DO discourage filesharing, so keep that in mind.