Copyright (©) is a special permission by the government granting someone a special monopoly right in certain uses of a work of art. Now, some might disagree whether certain works have any value at all; but the law grants certain protections to any work someone creates, subject to certain restrictions, which is why lawyers who handle "intellectual property" tend to make a lot of money.
Copyright gives its owner the ability to restrict certain uses of a work of art (generally called just a "work" on this very wiki) for a certain period of time. Once that period of time expires, the work falls into the "Public Domain" and the ability to enforce restrictions ends. Note that this is the ability to enforce a restriction; the copyright owner can choose not to enforce some restrictions, which is why Fan Fiction Dot Net still exists. The Grateful Dead, for example, had a policy to let fans legitimately make recordings of their performances (which would have been bootlegs if the permission had not been granted), even letting them bring recording equipment near the stage to do so.
The copyright owner is granted the right to stop certain uses, not the requirement to do so. This is different from trademarks; if you don't "police" your mark (stop misuse of it), then if there is a lawsuit the court may declare your mark generic (allowing anyone to use it) because you didn't actively protect it, or abandoned (you stopped associating the mark with the good or service). This requirement is not applicable to copyright—the copyright owner is allowed to use that right selectively, so they can ignore 4,000 violations and then successfully drop a hammer on the 4,001st. The fact they didn't go after the several thousand other unauthorized uses is not an issue the court is going to notice or care about. For instance, it was okay for J. K. Rowling to approve the HP Lexicon when it was just a Web site, but she attempted to throw the book at its author when it was being made into a book. This is due to the fact that Trademark is governed by the Commerce Clause of the Constitution rather than the Copyright/Patent clause. Trademarks only have value insofar as they represent something else. Copyrighted works are valuable as themselves.
This is also why Open Source/Free Software exists; the copyright holder chooses not to enforce the right to prohibit making copies, but still has the ability to go after someone who makes a new version of the work but does not release the source code of the new version. Or in the case of works licensed under the Creative Commons Non-Commercial license, they have no objections to making copies for others for free but you have to get permission to make copies to sell.
The right to stop some uses is not a natural right. Copyright as it exists now is a creation of government, and the rights the copyright owner does have can be and are restricted for some uses and not others. Basically it depends on who has better lobbyists to meet with members of Congress and get their side's interests put into law. The very first form of Copyright was The Statute of Anne which applied for 28 years. This law was so popular it was incorporated in the The US Constitution and has been extended several times. The 1976 Act is a complex piece of legislation that made nobody happy because it was the result of a nearly two decade fight between copyright holders and librarians among others representing the public interest. Nowadays the trend in copyright law is to pass broad sweeping prohibitions (such as the Digital Millennium Copyright Act) and have the Librarian of Congress review the law every three years to issue exceptions. The exceptions released in July 2010 have been seen as positive for the general public and believers in Fair Use.
There are six basic rights covered by copyright: reproduction (the ability to make copies), adaptation (translating to another medium, like turning a book into a movie or video game, or vice-versa), public distribution (issuing copies), public performance (performing a play), public display (showing a painting in a museum), and digital (running a computer program). Not every type of copyright work is protected by all rights. For instance, there is no performance right for sculptures. Sound recordings do not have the public performance or display right, the results of a compromise the music industry deeply regrets. The copyright holder can license away any or all of these right to different parties at different times. Further, it can subdivide the rights even further (one company can get the adaptation rights for film, another for television). Finding out who owns what rights and for how long can keep a copyright lawyer busy for a long time.
Also, some rights are lost once used, in particular, the "public distribition" right only applies to a work if it hasn't been sold. The copyright owner can set any terms or price for selling a copy, but once someone sells or voluntarily parts company with a copy of a work, they have no right to stop further redistribution or sale of that copy. That's why books, CDs and other items can be loaned or resold without having to get a license or pay royalties. This is also why software companies try to claim the software is licensed rather than sold; if it's licensed you don't own the copy and can't redistribute it; if you bought it, you own it and you can.
You can lend your copy of Inception to a friend and not violate the distribution right because it isn't sufficiently "public." What is considered public is defined by the common law (i.e., court cases). However, if your friend burns extra copies of Inception so you both can have one or uses the clips to make an Arthur/Ariadne tribute video, he has violated the reproduction (burning the copy) and adaptation (the music video) rights. Uploading the video onto YouTube might be considered violation of the public performance right. The question then become whether these uses can fall under Fair Use.
Certain rights, such as reproduction, do not require a public component—one unauthorized copy is enough to get you in trouble. Distribution though, requires a public component. What this means is that when a TV program uses a song in it, they do not have to get permission to reproduce the recording as part of the program, because that program is only broadcast, it is not distributed to the public. If and when they decide to sell copies of that program, then they do need permission to include the sound recording as part of the video, that's why some shows don't get released because of the additional clearances needed.
Any use of a song (music and lyrics) in a public performance generally requires a license. A broadcaster or a webcaster playing a song recording would be required to pay licensing fees for use of the underlying song (music and lyrics). Copyrights for sound recordings, due to a ridiculous tangle of state and federal laws, are notoriously hard to clear and it's best to assume that any original recordings are NOT in the public domain. However, this is different from copyrights in "musical works." The copyright law has a provision ("mechanical licenses") which requires that anyone who wants to create a cover of a song to be allowed to so long as they pay the statutory fees. The Harry Fox Agency is the place to go to find out information about fees in general. Owners of the musical work copyrights (who may different than owners of the SOUND RECORDING copyrights) may choose to lower their fees. This commonly occurs when the producers of Glee wish to cover a song.
For years the music industry has been trying to change this and get license fees paid for the use of the recording, the way the use of the underlying song has to be licensed. Record labels couldn't get past the National Association of Broadcasters ("NAB"), the trade industry group and its chief lobbying entity in Congress, so radio and television stations can still play sound recordings without paying additional license fees for the recording itself. But they could get a royalty for the use of the recording imposed on webcasters, which, in fact, the NAB loved the idea, because if the royalty fee on webcasters' use of recordings (which broadcasters do not pay) was high enough, it would kill Internet Radio, which, of course, is a competitor to NAB members and their offerings. (The NAB, of course, really doesn't like SiriusXM Satellite Radio much, either.)
It's a necessary evil if you want to make money off of inventions and entertainment. Stuff like copyright and patents are actually made to encourage people to actually sell their stuff, especially in a capitalistic society. No matter the society, musicians, inventors, researchers, authors, game publishers & developers, et cetra are people too. They have to have a place to sleep, a place to work, and to put food on the table just like you do. And it costs them money to make something for you, or for the greater good. There are exceptions such as people who distribute it for free or make it as a hobby, or opt to put it into the Public Domain rather than copyright it. The major tension in copyright comes from those who believe that copyright protection is a "reward" for creating a popular work or merely an "incentive" to get private individuals to create work for the greater benefit of the public.
One of the biggest exceptions to the exclusive right of the copyright owner is the concept of Fair Use, which allows some uses which the copyright holder would normally be able to stop. You can thank, of all things, the First Amendment to the U.S. Constitution for this. This is yet another reason Canada's fair use provisions are much narrower than even the United States allows: Canada has much weaker free speech rules.
It should be noted that copyright holders often do their best to discourage the concept of fair use. They'd prefer either to get paid for uses which would be considered fair use or even to stop a use they don't like, even where fair use permits it. For that reason, Fair Use is one of the most amorphous areas of copyright law and it's easy to find a case to support just about any proposition.
Toymaker Mattel didn't like the song "Barbie Girl," which parodied the unrealistic lifestyle of its Barbie doll line, and sued the group that produced the song. Judge Kozinski of the Ninth Circuit ruled that the song was a valid parody of the toymaker's product (and in a Funny Moment, Kozinski ends his opinion with the immortal line "The parties are advised to chill"). The Eveready battery company didn't like that the Adolph Coors brewery was doing a beer ad with an actor in a pink bunny suit parodying its "Bunny" ads (which were parodies of other ads), and in a case of "Can dish it out but can't take it," sued Coors over the ad. The court found this actor in a bunny suit a valid parody, saying "Mr. [Leslie] Nielsen is not a toy, and does not run on batteries." On the other hand, the courts have ruled that you do have to be making direct commentary on the work you're parodying - Geisel v. Penguin, a suit over a The Cat in the Hat parody mocking the OJ Simpson trial was found to be a violation of copyright, as the parody was using the Dr. Seuss work as just a vehicle for the message.
Copyright as we know it originally started when various governments wanted to stop some things from being written; they would grant some publishers licenses to operate printing presses, subject to having to clear what they published with the crown.
Eventually, it was realized that there was money to be made by the publisher; the idea of paying royalties to authors wasn't a given so copyright turned into a right to exclusively publish a particular work for a short time. The original Statute of Anne of the United Kingdom back in the 17th century granted protection for about 14 years. A single renewal was possible.
Copyright originally required registration for every country you wanted it to apply to; if you didn't register overseas, your work wasn't protected there. Publishers in the United States and the United Kingdom routinely "pirated" works from the other country perfectly legally, to the annoyance of some authors.
The annoyance finally got to where it couldn't be ignored. During the 19th century, at the urging of playwright Victor Hugo, the first international treaty to give copyright in multiple countries was established: the "Berne Convention for the Protection of Literary and Artistic Works." Most nations of the world, with the notable exception of the United States, joined the convention and became members of the "Berne Union" right away. The basic reason the United States could not agree to accede to the Berne Convention and become a member of the Union back then was that the treaty did not require copyright notices, which was a serious thing. If you have copyrights without copyright notices, then there is no way to be sure if a work has entered the public domain, and everything is copyrighted whether the author and publisher value it or not, up to and including grocery lists.
The U.S. often had special agreements with other countries that each would agree to give protection to works created in the other country subject to certain rules; these are called "Bilateral Arrangements". Near the beginning of the 20th century, the United States and many nations in Latin America developed a treaty called the "Buenos Aires Convention", in which a work first published in any country that is a party to the convention with a notice claiming a reservation of rights, would be granted protection in all countries that were parties to the treaty. This is where the term "All Rights Reserved" on copyright notices originated.
But at that, inertia often rules. In 2000, Nicaragua became the last country that was a member of the Buenos Aires Convention to also became a member of the Berne Convention. This means that since all of the countries of Buenos Aires are members of Berne, the use of the term All Rights Reserved is completely superfluous, since the Berne Convention doesn't require any form of copyright notice. So, even though the All Rights Reserved notice is absolutely unnecessary, and has been for more than ten years, it still continues to be used. There have been cases of works published in Japan with the phrase "All Rights Reserved" as part of their copyright notice, which would never have had any meaning at all because Japan was never a member of the Buenos Aires Convention to begin with. Plus Japan was on the Berne Convention anyway and didn't even require copyright notices.
Well since the United States could not accept being part of a treaty which gave copyright without including a notice on the work, to give better worldwide copyright protection, in the 1950s another copyright treaty came along called the "Universal Copyright Convention" (or UCC), which provided copyright protection in all countries that were parties to the convention as long as a special symbol was included on the work, along with the year the work was published and the name of the copyright owner, in a conspicuous place. The special symbol was the letter C inside a circle, which is where the C-in-a-circle feature ("©") of copyright notices came from. This was sometimes hard to generate, and in fact, the copyright office would accept as valid the use of the letter C in parenthesis "(C)" as being equivalent to "©". Since the UCC treaty used copyright notices, the U.S. could go along with it. In fact, the U.S. was the basic impetus for the creation of the UCC.
Until 1978, the United States had strict rules on copyright notices; if even a single copy of a work had no notice or the notice was not precisely in compliance, the work lost its copyright. One of the precise rules was the notice had to contain the word "copyright", (or later the C-in-a-circle symbol "©") the name of the copyright owner, and the year published or any earlier year. It could have been (and was) worse, the original copyright notice was in the form of "Entered according to act of Congress in the year 1895 by The Ayers Publishing Company". Copyright was for 28 years from publication with one additional renewal of 28 years. The notice requirement was a strict rule, if you put a year earlier than it was published, it meant the maximum 56-year period started from that year instead, meaning a shorter period of protection, probably not a big deal. But woe to you if you put the year ahead: publishing a work in December 1930 but putting a copyright notice of 1931 would cause the copyright to be void. These rules were relaxed with the passage of the 1976 Act (which allowed copyright holders to "cure" the defect).
Over time, the United States expanded copyright. In 1912 movies were added. On February 15, 1972, it was sound recordings. Later, semiconductor mask works were added. By 1988 the United States decided to drop mandatory copyright notice requirements; in 1989, the United States became a party to the Berne Convention.
Because Berne gives automatic protection and does not require copyright notices, except for technical issues involving differences in time limits, the Buenos Aires and UCC conventions are dead letters and of no effect. There are extra protections under U.S. law for using a copyright notice — specifically, proof of who the work belongs to (it's easier to defend the copyright when you have hard evidence that it is yours) and one guaranteed extant copy of the work.
There is one place where copyright notices are still required. The Berne Convention does not cover sound recordings. A separate treaty called the Phonolog Convention covers recordings, and it requires a copyright notice similar to the UCC. However, the notice for sound recordings is not "©" (letter C in a circle), but "ⓟ" (the letter P in a circle).
Another special case required the use of the letter M in a circle for the masks used to create semiconductors, the chips used in electronic equipment, including computers.
Over time, the protection of copyright has been greatly expanded. A work is now protected, with limited exceptions, for the life of the creator plus 70 years after they die, or if it's a work of joint authorship, life + 70 years of the last surviving author. For anonymous/pseudonymous works or works made by a corporate entity, the term is 95 years from date of publication (which is what triggered copyright before the 1976 Act passed and has its own complicated set of rules) or 120 years from date of creation. But don't expect that figure to be set in stone; it used to be the life of the creator plus 50 years, or 75+publication/100+ creation for works that cannot be attributed to individual creators. The Sonny Bono Copyright Term Extension Act added 20 years to all works still under protection, something that the Supreme Court found to be Constitutional because the term was still "limited."
Copyright in recent years is becoming an increasingly contentious subject, especially in the digital age, where some see it as becoming and increasingly irrelevant and outdated concept, especially when it comes to things such as derivative works and remixing, and extremely long copyright terms only benefit larger corporations in the long run, and severely limit the public domain. It can also be argued that copyright in its current form does little to benefit to truly benefit public and "promote the progress of science and useful arts" (the purpose of copyright as stated in the United States constitution, contrary to popular belief, compensating the creator is not the constitutional purpose of copyright, but rather to benefit the public). In fact, some would argue that intellectual property is not actually property, but rather a "privilege" with property-like... erm... attributes.
Adding onto this debate is a policy brief document that was released by the Republican Study Committee that was widely praised across social media circles by both democrats and republicans alike, but was quickly pulled after entertainment lobbyists and the US Chamber of Commerce pressured them into pulling the document (the RSC claims it was not properly vetted, nobody believes them), and into firing the writer of the policy brief. The brief itself involved shooting down multiple "myths" surrounding copyright, suggesting that copyright violates nearly every tenant of laissez faire capitalism (which makes the page image of Digital Piracy Is Evil Hilarious in Hindsight), and makes several suggestions for copyright reform, including expanding fair use to and dramatically limiting copyright terms to a maximum of 46 years, with copyright terms over 12 years being taxed. Basically, big media's worst nightmare, but fantastic for many people, especially on the internet, who see the RSC's backpedaling as a sign of cowardice and a step backwards for the Republicans trying to attract a new audience after losing the 2012 election. Although, this brief has been criticized, namely by pro-copyright law blog Copyhype.
With recent attempts at legislation such as SOPA and PIPA still in memory, the debate is not going away anytime soon.