Also license-free books from Project Gutenberg can be downloaded in .mobi:
http://www.gutenberg.org/
I have read several free classics on my Kindle, without converting them into anything. Kindle supports DRMed Kindle books and non-DRMed .mobi and PDF books. All these one can read in compliance Amazon's TOS and of course legally. And even format-conversion isn't breaking anyone's TOS usually in itself.
Now, breaking Amazon's TOS or that of some other book-seller is required to read DRMed non-Kindle books on Kindle, that is of course true. Depending on the country this may or may not break laws. Personally I haven't tried and the legality of this varies by region.