Breach of the terms under which the OS was licensed to you. You can acquire the software legally pretty easily: buy a box in one of their retail stores.

The (mostly-untested) theory is that clicking "I agree" on the license is a legally-binding contract between you and Apple. The Mac OSX license repeatedly says that a requirement of the use of the software is that it be used on Apple-branded hardware.

So, "illegal" based on unlicensed use of copyrighted material or based on breach of contract. At least, that's how I understand the argument.