File Sharing is good if the band is small, it gives them the exposure that radio denies. But if the band is big, then it's robbing them of sales, because they've already saturated the market.
Personally, I think it's a matter of personal ethics. If I like a band enough to download their entire CD, then I'm gonna go out and buy it instead.
File sharing is at it's best when you can get all of the b-sides and rare tracks that are impossible to find and really expensive to get. There is lots of content out there that I could never find if it wasn't for Soulseek.
Records on vinyl used to cost $8 or $9 per album. When cds came out, the labels doubled that price to $15 - $20 per album (sometimes as much as $25). If you over-charge you drive down demand... if people can find a way around spending that much, they will.
Finally, labels only have themselves to blame. They abused their talent and took advantage of their consumers. And now it is their technology that is destroying them. The irony certainly isn't lost on me.