I am kinda split on this issue. If there is software that someone would be willing and able to buy, then copying it or downloading it off the Internet is technically wrong. It doesn't bother me at all if people do it, but I do believe that if I copy a game or download something off the Internet that I would have gladly paid for if I didn't have the opportunity to steal it, then I think it's morally wrong. I may still do it because I don't care, but I know that's it's wrong.
However, there is a bit of a gray area in other cases. For instance, someone mentioned Photoshop. Photoshop, if bought legally, usually runs about $500 or more. Now, let's say (theoretically) that I have an illegal copy of Photoshop. I use it, and enjoy it. But if I couldn't steal it, would I have paid $500 for it? No--absolutely not. I could technically afford it, but it's not worth that much to me. So, if I couldn't steal it, I wouldn't be using it at all--I would seek out some cheaper alternative. Thus, am I really having a negative impact on Adobe by using it illegally? Since I wouldn't have bought it either way, they're not losing revenue by me using an illegal copy of it. It should make no difference to them financially. So, in this case, I am benefitting and they are not hurting either way.
Now, I know that it's a bit of a gray area morally--you could still argue that it's wrong. But, you have to admit that as long as I really wouldn't have bought it for $500, Adobe isn't hurting at all by me using an illegal copy. Stealing software is not like stealing a TV or something physical--it's just information. It doesn't cost them anything for me to make a copy.
We can apply this same logic to any software of any price. If I am using an illegal copy of say, some mediocre game that normally costs $40 to buy in the store. I may like the game, but if I had no way to copy it illegally, I wouldn't have paid $40 for it. Thus, I just plain would not be playing it--it's not worth that much to me. Therefore, again, that software company technically isn't hurting from me using an illegal copy. It may still be considered morally wrong, but they were not hurt by it.
However, if I am personally using an illegal copy of Quake 3--which costs about $30--then it's hurting id Software. Why? Because if I couldn't get my hands on an illegal copy, I would definitely buy it. Therefore, using an illegal copy is cheating id Software out of their chunk of the $30 I would have paid otherwise. In this case, it's definitely hurting that company. Luckily for id, they protect the multiplayer element (the best part) with a CD key system. This forces people who want full access to all online servers to break down and buy the game. It's the most effective form of copy protection I've encountered, and is a reason a lot of the people I know own legal copies of it and others such as Half-Life (to play Counter-Strike, etc).
So, the issue of how much it hurts the software industry comes down to whether of not the software is worth the price to the individual user. If upgrading my computer to Windows XP is honestly not worth $100 in my eyes, then Microsoft is no worse off if I use an illegal copy--they wouldn't have gotten my $100 either way. It may still be morally wrong, but the financial harm done is basically nothing.