Are Emulators Legal? Should they be?

I've read a lot on Emulators since they came out, but have never been able to find a definitive answer in regards to copyright infringement, or issues with file-sharing. Some say that they're allowed, simply because a company can only protect certain things--mainly the coding--and emulators use a mirrored equation, so technically it's not plagiarism. Other people say that by recreating the story, characters, design, etc. that they are redistributing an intellectual property they have no claim on.

It's possible it falls under the same category as Napster did prior to them being sued, in that it's not legal, but it's not illegal either and all one person (which will probably end up being Squaresoft) will have to do is sue them before there's a tighter restraint on what is/isn't allowed.

And I know that we've had a debate on this prior, both with music and with the Chrono Trigger remake, but is allowing someone to play your old game for free really that bad?

I can understand how bigger companies may lose out if someone was playing Fallout: New Vegas before it even hit stores, or an emulator was allowing people to download Red Dead Redemption for free, detracting from their sales. I'm not one of those types of people that needs everything for free. I love the video game industry and I support it. I know that if they lose money I lose quality and I would hate to see that happen.

The problem is that I have to go to great lengths to play retro games, be it buying them on Ebay, Amazon or even some two-bit Flea Market. Given how many there are, and the vast amount of which I want to play it's a massive task; one that I really would rather not endure. Granted, I would feel bad for taking money away from the actual developers--and I could be wrong here--but it's like that instance with used books and the person selling it for $200 when they only bought it for $10. The author didn't see another dime for them selling it used, and I don't imagine a developer is going to lose/gain from my purchase of a game under the same pretenses.

And maybe that's why there hasn't been a huge push to lock emulators down. Maybe developers know and understand this simple fact: By allowing us to play games that are no longer in development they don't stand to lose sales on said retired projects, rather gain it by garnering appreciation and approval from the fans of older games who will in turn seek contemporary entertainment from a company they trust.