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@Harry,
Because the English language is funny like that. Piracy isn't illegal in some areas, but to most people "piracy" means someone other than the author uploading the book to a torrent for file sharing.
As for why the author encourages it? I would say for many reasons. I ask people to pirate my book because:
1. Not all of my readers can access my books through the usual methods.
2. I trust my readers to use the Dark Net as a library and tip me should they so choose.
3. I consider obscurity to be a greater threat to my success as an author.
You ask if this is fair to the readers who pay to read. Why wouldn't it be? As long as the author is up-front and honest about the situation, nothing is stopping the readers from making the choice -- as with the 40kbooks link above.
Unfortunately, more indie authors *can't* be upfront with a "read for free!" link because Amazon will price match them and remove the easiest way for their readers to willingly tip them. (Paypal doesn't work for some folks.)
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