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.