Today, YouTube prohibits its users from downloading videos into their computers. The reason is… money.
Displaying videos is usually accompanied by advertizing. It is how YouTube makes money, and it would certainly like to prevent users from watching videos ad-free.
When you suppress ads while browsing the Internet you deprive owners of websites of their income; it may be unethical but it is not illegal as such.
Many videos that have been uploaded to YouTube are copyrighted. It is against the law when you download a copyrighted video from YouTube for massive distribution or public broadcasting purposes without obtaining the prior written permission from YouTube or Google Inc. or if you charge others for watching this video. However, it is generally fine to download a video for private, personal and non-commercial use. Basically, as long as you are not making money from someone else’s hard work, you are not doing something wrong.
For example, no one is going to sue you if you make sound recording while listening to the radio at home, just because it’s your own radio, your own home and your own recorder. There is no substantial difference between sound recording and downloading music (or video) from YouTube. In the Internet you can find a lot of services allowing users to download videos from YouTube; however, none of these services has ever been convicted of any crime. Besides, YouTube is not able to track you if you download any video from YouTube using a third-party software.
What YouTube does is broadcasting content through the Internet. Thus, there is nothing wrong if users are allowing to watch such content later as they may want. It is worth noting that in Sony Corp. of America v. United City Studios, Inc. (464 U.S. 417) the United States Supreme Court held that such practice, also known as time shifting, was lawful representing fair use under the US Copyright Act and causing no substantial harm to the copyright holder.