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Illegal content? I guess they mean copyrighted content? Isn't that pretty much the entire internet? Even this comment is my intellectual property, so will this make you a criminal if you link to this comment without my consent? And isn't youtube making money of copyrighted content, or does youtube have a special deal with the court that only they are allowed to do this?

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They mean unauthorized copies of copyrighted works, not all copyrighted works.

A previous ruling of the CJEU covered a similar situation to your hypothetical, and ruled that once something is made freely available to the general Internet by the copyright holder, they lose the right to control who can link to that content. Of course, they retain the right to control who can copy it.

YouTube has a system in place for reporting infringing content. It's not necessarily very effective, but it's better - from a legal standpoint - than being told repeatedly that content is infringing and but intentionally and knowingly republishing links to the content each time another set of infringing copies gets taken down.

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