Maybe they started out as illegal copies, but I've seen numerous that are obviously easy to sue into oblivion if they were unlicensed.
I think "fake it till you make it" is the proper understanding; similar to guitar tabs.
Wikipedia has "It became so popular that the books was eventually "legitimized" by publisher Hal Leonard, and re-released in a series of editions and transpositions for various instruments" so maybe it was both, kinda.
People were certainly using the illegal books until fairly recently, and I still see a lot of them around. They're easy to spot, as the manuscript style is fairly unique. And the mistakes. ;-)
Myself, I gave up on fake books more than 20 years ago, because I thought that they weren't helping my playing any more. They are a crutch. Do you really need to read Blue Bossa?
According to legend, the publishers decided to stop going after the illegal fake books, preferring to get their royalties from performance licenses. It's hard to sue a bunch of penniless musicians into oblivion.
I think "fake it till you make it" is the proper understanding; similar to guitar tabs.
Wikipedia has "It became so popular that the books was eventually "legitimized" by publisher Hal Leonard, and re-released in a series of editions and transpositions for various instruments" so maybe it was both, kinda.