I'm just going to post my 2c. This is a fairly controversial subject so I just want to make it clear that I mean no ill will to those who disagree, and I take no offence to any upcoming rebuttals of my post.
I'd also like to remind everyone that isn't quite the black and white issue we like to make it out as. Piracy has its good side and its bad side, the question is more which outweighs the other.
I'll start out by saying that I don't think it's fair the way digital distribution works in this day and age.
In the past, all goods were to some extent made by hand, even something like a book - sure there were many copies out there and the author did not have to individually write every copy, but he did have to pay a publisher to produce more copies, which were then sold for a fee.
If a book was stolen from the shop, then you could say the author lost the cost of producing that book. If however someone purchased a copy of the book, read it, was done with it, and then gave it to their friend to read - the authors did not have a problem with this, after all, it only cost them the one fee to produce the book in the first place, so why charge two people? Technically this too like piracy will have resulted in some people who would have bought the book not buying it because they were able to receive old copies from friends - was there a big uproar about this? No, of course not, if the book was a hit, the author made a good sum of money.
Now the same author can type his book up once on a computer, not pay a single person any money, and have it available as a PDF file that can be copied infinitely without him having to pay a penny - and he can charge people for every copy made, effectively in the short term giving him a limitless well of money. The guy can spend a year writing his book and then spend 20 years selling millions of copies without spending a penny, constantly making more and more money. He's not continually getting free money from something his work has long been paid off on, something inferior to a book that you can hold in your hand - even in the rights department, since now, if someone hands this book over to his friend when he's done with it, he's now labelled a pirate and liable to be sued for a vast sum of money.
At this point you're probably thinking that I don't understand that the content creator deserves the money they've worked for - of course they do, and this is the thing, through digital distribution a content creator can become a self publisher for free, sell 10x as many or more copies due to the vast influence of the internet - but that's not enough, they now want to publish the little guy who downloaded a few books or games because he simply couldn't afford them or wanted to try them before he bought them - and rather than charging him, y'know, the price of the software downloaded, he's suddenly knocked over the head with a $100,000 fine because of all the peers that connected to his computer to download bits and pieces of the files while he was downloading them for himself. This is plain ridiculous, and only motivated by greed.
The fact of the matter is piracy isn't causing people to not get sales. It's doing two things One as a positive is that it's spreading the word and getting knowledge of games/music/film/software/books etc out to people who didn't previously know about them, or who might not have considered purchasing them until they tried them out and saw how good they were. The other is more negative - some of the people who pirate the item would have bought it but since they're able to obtain it for free they won't part with their money.
Now the fact of the matter is, you can't stop piracy unless you shove a load of unwanted DRM in your product - if you do that, you'll probably lose more customers than if you'd just been okay with the fact that no matter what you do some people are going to pirate it anyway - even worse if people get past the DRM as then even more people will pirate it in retaliation to this, even some users who normally don't pirate and simply want a DRM free version. Fining the little guys who aren't making any money and are just sharing or downloading files is not the answer, it's just harming people who aren't thieves or villains, but are simply using the internet for what it was designed for - sharing of files and information.
If you make a good digital product and advertise it well, particularly in the case of large companies, you will rake in much much much more than you need in profits and any initial loss in sales due to people pirating it will quickly be made up for by both legitimate and pirate owners of the product spreading the word about it and how well made it is - even moreso if you stray away from greed and DRM, as people will be genuinely happy to use the product and will recommend it to their friends.
In the information age this is one of the best ways to increase product sales, and for this reason I think if someone were actually to do an experiment in which two near identical products were created, the same amount was spent on advertising the products, but one of the products was easy to copy and give away and the other was filled with DRM - I think the DRM-free product would make a lot more.
Now if you're the creator of a product and you want to reduce the number of people pirating it, there are a number of things you can do other than DRM:
1) Make it good - this goes without saying, but if your product sucks, I'm sorry but not many people are going to want to pay for it.
2) Make the price reasonable. $50-60 for a game is not reasonable! SImple as that. I refuse to ever pay that much for a game no matter how good it is, if you're going to put a ridiculous price tag on it, I'm going to pirate it.
3) Make sure it's DRM free, or the DRM is unobtrusive - if your product is filled with nasty DRM, I'm either going to find a pirated copy that gets around the DRM, or avoid it altogether.
4) Make it worth the amount you charge - Don't charge $20-30 for a digital copy of a game when it's costing you very little/nothing to give out these copies - if you want to charge more, offer a real CD, a manual, a nice box, a map of the game world, a poster, whatever, physical goods are nice, and no-one can ever pirate the fancy hardback manual you made, sure they can have a PDF version but it's not as nice - even in the case of abandonware where the money isn't really going to the author any more I've bought many a game just for the nice box, manual and extras. I'll even pay extra cash for it over a digital copy, for sure.
Now I don't want to write a whole book on the subject but I think anyone who's bothered to read so far has made up their mind by now whether they agree with me or not, so now I'm going to explain when and why I pirate:
If a game has completely sold me with their trailer and ingame videos and the whole idea and concept, and the reviews are good, the price is reasonable, it's not filled with stupid DRM etc - I'll buy it outright.
If a book has good reviews, seems interesting, and is available as a proper in-hand copy and not just through digital distribution - I'll buy it outright.
If I was unsure of a game prior to knowing how to pirate, I simply avoided it like the plague, I'm a frugal person and I don't go around purchasing things unless I'm sure I'm going to like it. Since discovering piracy, rather than dismissing those games as not worthwhile because they failed to impress me prior to trying them - I pirated them, tried them out, and in many cases I was pleasantly surprised, found out I liked the games, and bought a copy. Some notable examples: Neverwinter Nights, Thief: Deadly Shadows, Arcanum, Dungeon Keeper, Theme Hospital, Minecraft. All of those gems I'd have never purchased were it not for piracy, in the case of Minecraft in particular I think a large portion of its userbase discovered it this way, I'd say about 50% of the people I know personally who own it pirated the game prior to purchasing it. None of the people I know who pirated it didn't go on to buy it - the quality and addictive gameplay were enough to encourage purchases from everyone involved.
If a game seems poor at first and upon pirating it I still find it to be poor - I wouldn't have purchased it, and I still won't purchase it.
If a game is incredibly overpriced or full of obtrusive DRM, I'll pirate it, and I won't consider buying it unless that changes.
For reference I've pirated probably 80-90% of the games I've tried. I currently have around 60-70 games currently installed on this computer, around 50-60 of which I own legitimate copies of (most of which I'd tried before for free either on friends computers or via piracy) and the other 10 are pirated, some of which I never plan to buy and have simply not got around to uninstalling, some of which are great and are in my wishlist for the next games I go ahead and purchase, and some of which I'm trying out at the moment to see how good they are.
Tl;dr: Piracy can be good and it can be bad, I argue that it's good because imo if your product is good it'll help spread the word and increase sales more than it'll reduce them. In my case it's certainly done that.