A lot of people get confused about this and here is why:
The program itself is perfectly legal - there is nothing wrong with using a peer-to-peer file sharing system.
HOWEVER
If you are using it to get music, or movies, or programs for free, then THAT is illegal. You are essentially stealing from the people who made the music/movie/program, and that is wrong. And free music and movies is practically the only thing that ever gets downloaded from limewire, most people assume limewire itself is illegal.
Limewire itself and other peer-to-peer sharing applications are themselves not illegal, however if you choose to share movies you or other content you may be breaking copyright laws.
Illegal depends on what you're downloading with it.
Is rapidshare illegal? No. It's a file sharing system. If I create my own video and share it with you over rapidshare and you download it you're not doing anything illegal.
But if I rip a DVD, and share it with you over rapidshare, then what we're BOTH doing is illegal.
Uploading or downloading works protected by copyright without the authority of the copyright owner is an infringement of the copyright owner's exclusive rights of reproduction and/or distribution. Anyone found to have infringed a copyrighted work may be liable for statutory damages up to $30,000 for each work infringed and, if willful infringement is proven by the copyright owner, that amount may be increased up to $150,000 for each work infringed. In addition, an infringer of a work may also be liable for the attorney's fees incurred by the copyright owner to enforce his or her rights.
Whether or not a particular work is being made available under the authority of the copyright owner is a question of fact. But since any original work of authorship fixed in a tangible medium (including a computer file) is protected by federal copyright law upon creation, in the absence of clear information to the contrary, most works may be assumed to be protected by federal copyright law.
Since the files distributed over peer-to-peer networks are primarily copyrighted works, there is a risk of liability for downloading material from these networks. To avoid these risks, there are currently many "authorized" services on the Internet that allow consumers to purchase copyrighted works online, whether music, ebooks, or motion pictures. By purchasing works through authorized services, consumers can avoid the risks of infringement liability and can limit their exposure to other potential risks, e.g., viruses, unexpected material, or spyware.
Not to mention limewire gives you viruses, even if you are careful.
Limewire is perfectly legal. HOWEVER, the way people use it is illegal. Sharing copyrighted music without consent of the original author is not legal, you are meant to pay for these things.