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Torrents are a way to share files between computers without uploading them to the web first. They're also a way to download files from multiple locations instead of just one (although they have to start at just one location); this cuts down on the bandwidth used by any one computer. Because they work in pieces, the downloading/uploading can be spread out over time, so very big files can be downloaded some today, some tomorrow (which is much less common than it used to be).
Legit use of torrents:
An independent band releases a new album in mp3 format, and a video of their recent concert, and wants it distributed as widely as possible to promote attendance at their concerts. They release it to various torrent search sites, host it on a few computers (their own), and people download it & start torrenting. New people interested in the band can search for them, and download the entire high-quality album from a couple-dozen computers at once, instead of the band itself having to host a server that will endure dozens of high-speed downloads of 500mb of files. Fans in rural areas with dialup, or in countries where high-speed connections are less available, can download it over time, rather than locking their computer for several hours on a single download that might crash, losing them all of the data.
Michael Moore released his most recent movie as a free torrent, in a couple of different formats.
Not legit use of torrents:
Buying the Twilight ebooks, and creating a torrent for them, so that fans can download the books without paying for them, and they're not located at any one website that can be easily identified and tracked. (They reside on individual users' computers, and are only "findable" when those computers are online and the torrent protocol is active.)
How you tell if a torrent is legit:
The same way you can tell if someone selling items at a yard sale is selling stolen goods--you have to know something about the goods in question. Unlike a yard sale, you can't see who's on the other end, so you can't judge their honesty or intentions.
There's an additional layer of fuzziness, in that (noncommercial) copyright infringement (in the US) is only enforced by rights-owner preference, unlike crimes that the state can enforce. That means, even if it's an unauthorized copy, the rights owner, not someone else, has to complain about it. And there are both bands and authors who don't actively disapprove of unauthorized copying, figuring that it doesn't cost them much and gains them some publicity, and that if they are cool about it, they'll have more fans. (There are plenty more who actively disapprove and want it stopped.)
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