Meanwhile, there are benefits to iTMS users:
1) Music can be played on older computers (OS 9, Win 98/ME -- people do still use these, even if not as their primary computers)
2) Music can be played on non-iPod music players.
3) Music can be converted to mp3 to play in cheap players or burn to mp3 cd's
4) Windows users can now (like mac users have been able to all along) use their music files in movies, etc. -- iMovie supports AAC-p, but there is no windows movie software that does.
5) If, for some reason, people want to switch music software at some point in the future. Even if iTunes is the best jukebox software out there now (this has been disputed), odds are that it won't stay the best forever. This gives them the option to switch software in the future.
So yes, it's technically illegal. But overall:
--The impact on the music industry is basically nothing, because music can be pirated far more easily by other means
--The impact on the iTMS is net positive because it allows customers to get more value out of their products, while it's not likely to increase piracy.
So, all in all, it's a net positive for iTMS.