For example - were any users ever pursued for purchasing discount (and, I'm guessing, not 100% legal) tracks off of mp3.com?
If Bob downloads a bunch of tracks the company can sue for the cost of each track - $0.79 per track, plus costs.
If Bob then uploads a bunch of tracks the company can sue for the cost of each track, multiplied by the number of people in each swarm, plus costs. This gives the ridiculous many-thousand dollar sums.
Both are illegal.
If Bob burns the content to CD and takes a bunch of them to a car-boot sale it becomes a criminal offence.
(I'm in the UK and legal terminology is a bit confusing when it crosses from the US.)
That's actual damages, and in practice labels find those too small, so they go after statutory damages instead, which is why the different appeals in the Capitol v. Thomas case have awarded them completely disparate amounts, from $54,000 to $1,920,000, for sharing 24 songs on Kazaa.