Crackers work at the level of cracking the existing software, coming up with ways to bypass the various copy-protections. Such small programs called "cracks" manipulate the coding of software to deactivate the limitations imposed on the free software, while keygens involve producing authorization keys (or commonly termed "cdkeys") that would make software fully-licensed, retail software from a trial or limited version. .
"Pirates" are individuals who unlawfully distribute these counterfeited software in mass volumes. Pirates usually form "distribution rings" that operate much like a gang. Pirates are most responsible for perpetuation and advancement of counterfeit software industry.
It is important to make these subtle distinctions in order to understand the massive world of underground pirated software. Although average computer users may engage in occasional counterfeit activities (i.e. lending a copy of your Microsoft Windows), it is important to acknowledge that major illegal pirated activities are being engaged in at "corporate levels", where pirated software are mass produced and distributed across a wide range of audiences and nations.
Pirated software finds its way from producer to consumer in various ways, from car-boot sales to organized distribution rings, to such popular Person to Person file sharing programs as "KaZaA Desptop". Before the internet came to a wide availability, counterfeited software found its way around local users and personal contact. Software would be selected from a list, which would be written into storage devices (floppy or CD-ROM's), and were delivered directly by person or by mail. It was not uncommon for the costumer and the seller to know each other. Stronger intellectual-property and anti-piracy laws, however, changed this situation, and many of those that engaged in such activities had been forced to cease activity.
As the internet became readily available and as faster internet connections started to come into existence (such as ADSL or ISDN), internet provided a fast and efficient way to distribute pirated software.