Improving someone else's idea by improving the execution is the primary way innovation and business works, there are rarely completely new ideas/products. Most "new" things are just improvements on old things/products.
The execution can be copied however, and if too much copying with not enough differentiation is taking place, it's theft.
I can't clone Facebook completely, change the logo, add a dislike button and then call it my own. That's theft, not innovation. However, I could take all the best ideas from Facebook, from Twitter, Gowalla etc. and create a unique social network I could call my own. That's innovation.
Pownce was a good example. It was Twitter with new features, but they didn't copy Twitter. They copied the idea and improved on it, but they didn't copy the look and branding. It would be theft if they tried to immitate the graphical profile and user interface of Twitter down to the smallest detail. Twitter won the battle, but it wouldn't be wrong if Pownce did even though Twitter was the first.
Theft: http://techcrunch.com/2011/06/16/war-zynga-sues-the-hell-out...
Borderline (compared to Halo): http://itunes.apple.com/us/app/n-o-v-a-2-near-orbit-vanguard...
Okay (compared to Groupon): http://livingsocial.com