Why is file sharing "bad". From the record labels perspective it seems bad because it replaces their business model (which is primarily based on distribution). But I think the "bad" is slightly different for the artists.
File sharing isn't directly analagous to stealing, because stealing implies exclusive ownership of some property. I'm stealing from you if I take your CD because you no longer have the CD. If I copy a file from your computer, it's not quite stealing because you still have your copy. You are no worse off because I copied the file from you. I think this is primarily why file sharing was so popular. It cost people very little to contribute "their" files to the system. The problem was, their files were really their's, they belong to the record labels.
Those traded files didn't cost record labels in the same tangible sense that me stealing CDs from a warehouse would(no I don't steal from warehouses)... they represent a lost opportunity. Back when I didn't have a song, there was the opporunity for a sale because I wanted to own it. If I procure the song using a file sharing utility, the "lost" from the label or artists perspective is that there is no longer an opportunity to sell me a CD.
So, part of the goal of the system will be to allow for file sharing, without the pain of losing that opportunity.