Nearly all fansubs are produced by anime fans for fans, and are distributed free (or at the very most, for reimbursement of incidental costs such as blank tape for the particular copy, postage, etc.) Those who do charge money for fansubs are frowned upon as bootleggers. Fansubs are distributed through local anime clubs, trading through the mail or now through file-sharing services on the Internet.
Although technically illegal -- Japanese copyrights are honored in the US and other Berne Convention and WTO countries and vice versa -- some anime licensors look the other way on fansubs as "free advertising" since people who see a fansub might buy the release on DVD if they enjoy it. Other companies, both Japanese and North American, have much less tolerance for fansubs. Some Japanese companies have asked fansubbers to not translate their properties (Production I.G in relation to Ghost in the Shell, and Media Factory in relation to all its titles), while representatives of some American companies have publicly stated that they do not appreciate the efforts of fansubbers.
Fansubbers also follow a code of honor of sorts, and many fansubbers halt all work on a title once it has been licensed in the US. By the same code of ethics, people who collect and watch fansubs are expected to destroy their fansubs when the show is licensed and purchase the commercial products when it is released.
Despite the code of ethics, fansubs routinely remain available long after the commercial release and are often sold by thrid party bootleggers who are not affiliated with the original fansubbers. Furthermore, some fans and fansubbers disagree on the code of ethics and do not cease production and distribution of the fansubs when the show in question is licensed. Some fansubbers stop only when a commercial release date is announced, others don't stop until the commercial release, and still others continue until they have finished fansubbing the entire series.