In the US, unpaid internships are only legal when they pass a six-part test. Generally, if the intern is doing stuff that benefits the company the internship must be paid. http://smallbusiness.findlaw.com/employment-law-and-human-re... lists the six-part test

If an intern is 'working' for free, then it's considered educational. They're not allowed to contribute materially to the business. For example, I can have an unpaid intern shadow me and watch what I do all day, but I can't put any code they write into production.

As I understand it, many of the internships that happen today don't meet the (U.S.) legal requirements, but neither party (the intern nor the company) is complaining.

Basically, the intern is supposed to be learning a trade with some incidental work output, and what really happens is that they are given junior-level labor and some guidance and pointers (i.e. the same thing you'd do with a PAID junior level worker).