Making the copies is "maybelegal". Making a copy, for personal use, of content you're licensed to use and own the physical media of, is technically legal--you're supoosed to be able to make backup copies of software, put a CD on a cassette for the car, or photocopy a book you bought. By this standard, it's also legal to make a personal use copy of a DVD, for example to watch on your iPod.
Circumventing the Macrovision and CSS encryption on the DVDs, however, is technically illegal according to the horribly written DMCA. Since you have to do this to make a copy, I believe it works out to something like "it's not technically illegal to own the copy, but it's illegal to actually make the copy".
This came about because the big media conglomerates had failed to legally prevent people from duplicating stuff for their own use (fair use has been around for a while), and they failed to come up with an "unbreakable" encryption standard (that's basically impossible), so their only recourse was to get a new law made (DMCA) that makes it illegal to mess with encryption in the first place. It probably should be unconstutional, but so far the government here in the US has let money talk and let it stand.
In fact, though I could well be mistaken, I think you would be within your rights to make an exact duplicate of a DVD if it included the encryption, but nothing I'm aware of does that, and maybe there'd be another reason that'd be illegal.
All that said, there are already several companies selling software that will let you do this despite legal attempts to prevent it (some have been shut down), and I've seen DVD-VCR combos that will let you copy right to a VHS tape, so the MPAA would be hard pressed to go after individual consumers for making a copy of their own DVDs. So far they haven't, as it's far more effective (which still isn't very) to go after people who actually spread the copies around on the net.
