@jay81uk check out Sony vs connectix or bleem and you'll see that not once have emulators been ruled illegal in a court of law. Now if an emulator ships with copyrighted code like BIOS or games like ROMs litigation is guaranteed.
Emulators are nothing more than a codec for video games, just like a DVD is no more than a codec for a filmstrip. Having a DVD is not illegal, downloading a movie, and selling a DVD with someone else's movie on it is. Same with emulators and roms. Frank cifaldi gave a fantastic speech on emulation and why it's been vilified.
http://www.gdcvault.com/play/1023470/-It-s-Just-Emulation
It is a fascinating topic. Definitely worth watching all the way through.