First of all, to define emulation and give a little history on it. A flashcart is defined as a blank cartridge which fits a video game console the same way a game does, but comes blank and can be filled with one or more games. Japan, with its looser copyright laws, has toys you can't really get in America. One such toy, the cart copier, sits between a game and a console, with a wire that plugs into your computer (used to be serial, now USB, I imagine). You plug this bad boy up, and you can copy games to your computer or run games on the console, from the computer. I think the Japanese had services where you could pay to download games into a flashcart, like renting or maybe even buying. At some point, some genius somewhere took a game backup (aka, a ROM) and made a program which would let them play it on the PC. Now, many years later, every Nintendo, Super Nintendo, Game Boy, and Sega Genesis game ever made can be downloaded and played on your computer, you just gotta know where to look.
Naturally this has shaken up the gaming industry a bit. Most developers (Nintendo, for example) are completely opposed to it. Most gamers are on the fence - they couldn't care less. But a few of us are pretty passionate about emulation, one way or the other.
The argument against emulation is a strong one. If people don't buy games, the developers lose money. If a game doesn't meet sales expectations, the development team will be less inclined to make another one, or their publisher will be less inclined to ask for another one. And then of course you have the older-than-time argument that you should pay for what you use, regardless of how much money the industry has and what they do with it.
But I think the argument for emulation is stronger. While all but the last points apply to current games, the number of people pirating current games is much lower. And there is a difference in terminology here. You can't emulate current games. It is possible to play Xbox games illegally on an Xbox, or Nintendo DS games illegally on a DS. And of course PC games. But that isn't emulation, if it's same system to same system. It's only emulation if you use something else.
As for actual emulation, the systems being emulated are no longer sold in stores, nor are the games. There are some people who are technically losing money on emulation, though - the people trying to sell this stuff on eBay for hundreds of dollars. But no, Nintendo isn't losing money if you emulate, say, Super Metroid for the Super NES. They're no longer selling the title and have no plans to port it to the DS. That's a game I would pay for to play on my DS.
The biggest hole in the argument against emulation is that emulation - software piracy in general - cheats the publisher of money they would have made. In other words, if I were to hypothetically download Windows Vista, Ultimate Edition (which is hypothetical only because I'm on Dialup and it's over 4GB), I would be taking $400 from Microsoft. Now, I'm broke as a joke. I work for a living, and I got bills to pay. Not to mention this hospital bill from last year I got to pay off. Wife and I haven't eaten out since our anniversary, and we're buckling down on everything. Say, if I were to somehow acquire Vista Ultimate, and then send it back to Microsoft, could they send me the $400 I've given up? So that argument doesn't hold water, because something that is downloaded hasn't got the same value as the same thing in the store. Heck, Windows is a great example because it doesn't even have the same value from store to store. If you buy it with hardware it's cheaper (but the license is more restricted). If you're a student it's cheaper. If you buy more than 5 copies, or you're the right kind of journalist or blogger or other "friend" of Microsoft, it's cheaper. I think you can even get it for free (legally) if you know where to look, what deals to (legally) exploit. I could have got XP Pro for free (legally) from Microsoft, all I had to do was lie and say I worked for a place that sold XP, like Best Buy.
And then there's "pirates/emulators don't buy games". Well, I buy games. All the Super NES games I would like to emulate on my DS, except a couple, I owned. I owned my favorite 3: Super Metroid, Secret of Mana, and Zelda 3. I bought those games new, maybe used, but I legally bought them when I had a SNES. I bought the SNES, and Super Mario 3 (a NES title) with my own money, allowance I saved up when I was a kid. Other games, my parents bought me. We had probably 20 NES games, and 10-15 SuperNES games. We bought the N64 and half a dozen games. We bought the Playstation and Ps2, half a dozen games each. We as in, my parents, my brother, and I. I bought the Game Boy Advance, the Nintendo DS, and about half a dozen games between them. Not to mention countless PC games over the years. So I'm a fan of, and have financially supported the gaming industry over the years.
I don't believe that someone who has bought a few games has the "right" to download the rest of the games, not necessarily. NES, SNES, Genesis, nothing wrong with it, because these are "dead" systems. The publishers don't care about 99% of those titles (the other 1% having been ported to new systems) and the only people making money on legitimate purchases, are collectors. These people will tell you that Nintendo and whomever need to still make money on these games, even though that's not possible. What they really mean is they want you to give them money. As if somewhere they were guaranteed to sell their games or game system for two, three, four, five times what they paid for it in the 80s or 90s. And, ironically, it's these people who help to encourage emulation, or piracy, whatever you call it, because these systems and games are still around, but collectors keep the price high.
A little rich brat can buy an NES on eBay and some games for it, and that's fine, but us working class scrubs can play the games on the PC, and that's fine too. It may not be as authentic, and it may not be approved by Nintendo, and the collectors selling them on eBay might get mad, but there's really nothing wrong with emulation, in most forms. What Nintendo needs to do is spend more time listening to the consumers. They've ported a few NES games to the Game Boy Advance, and a couple SNES games, but only one of the best three. For a DS owner and PC user, emulation is still the only choice to play a lot of the classics.