The torrent system is certainly not illegal, I downloaded a FEAR demo torrent right from the official site. But the uploading of copyrighted stuff is illegal, though I'm not sure if that works for Demonoid, that site is kind of strange.
Just read this article, and apparently they seem to be going for a blend between free play and p2p. I think what he's saying is that insead of releasing big expansions with months in between, they'll get people to subscribe in order to get new content.
So not only are they removing the differences between RPG's and FPS's, but they're also erasing the lines between MMO's and non-MMO's. Interesting.
Aw, great, now I will definitely not be playing that game...
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The problem is, Hellgate's policy goes to multiplayer, multiplayer is not piratable.