From verious articles, the Movie industry was upset because on MegaVideo they indexed, searched and removed what they could identify as copyright infringing material, but apperantly the MPAA thinks this is bad because they can't come in later to find out how bad the problem is. In other words they can't sue them for knowingly hosting illegal content. There are claims they "Paid" illegal uploaders, although I haven't seen or read of anyone who knows anything about that.
I'm still trying to figure out why Megaupload is illegal buy YouTube is not. In fact YouTube really does pay people to upload videos but go too far with the DCMA takedown process since it appears you don't have to do anything to prove you are the copyright owner and the process to get your rights (and advertising revenue) back is insanely difficult.
On the other hand, this is having the desired effect, at least one other service has stopped sharing services. Unfortunately there is nothing inherantly illegal with filesharing, millions of people do it legally every day, But because it could be used to share copyrighted material, the RIAA and MPAA want it banned. IF they had their way, most technology we use daily would be banned, although I am surprised they haven't gone for the Add a giant tax "For the artist", don't pay anything to the artist and sue infringers insane amounts for what should be fair use, and use proceeds to pay lawyers and executives. Oh, wait, they already have in some countries!