File sharing is not illegal. I can send you a file of mine (for instance by email), or receive one from you without any problems, as long as the file being sent is uncopyrighted.

Allowing others to download copyrighted material from you that you don't have permission to share *is* illegal. Nobody has been arrested for this yet, although the RIAA has sued a few hundred people.

Downloading copyrighted material from others that they do not have permission to share is not theft, but is copyright infringement. As far as I know, nobody has been sued for this yet.

Piracy is grand theft carried out in a location not bound by any national law - traditionally of sailing ships on the high seas, me matey. No area of the Internet other than possibly a few deep-sea cables and remote satellites lie outwith national boundaries. Short of someone stealing data by tapping into one of these, there is no such thing as piracy on the Internet.