Roughly speaking, the courts have held that:
Linking from one web site to another in a normal way, so that the other page replaces the current page in the browser, like this:
<a href="http://www.othersite.com/">Interesting Other Site</a>
Is always legal; however, if you knowingly link to a site which infringes on the copyright of a third party, such as a site that sells knockoffs of DVDs, you may be held legally responsible as well. Especially, of course, if you profit from it.
Creating a small "thumbnail" version of an image on another site and using that to link to the other site is also acceptable.
Linking directly to images, not pages, on other sites, or especially embedding them in your own site without their direct permission, may not be legal and is definitely unethical. Examples:
DON'T DO EITHER OF THESE WITHOUT PERMISSION
OF THE OTHER WEB SITE INVOLVED:
<a href="http://www.othersite.com/picture.jpg">
Picture On Someone Else's Site
</a>
<img src="http://www.othersite.com/picture.jpg">
Using frames to bring up the web pages of another site so that they appear to be part of your own site, without permission, may not be legal and is also unethical.
For a regularly updated source of great information regarding legal cases that affect the right to link to other sites, I suggest visiting linksandlaw.com.
