As far as the DMCA and RIAA is concerned, ripping CD tracks to your computer is illegal, even if you purchased the CD legally. Computer hardware doesn't currently employ SCMS (serial copy management system), and there is no royalty paid to the RIAA when you purchase CD-ROM's, HDD's, etc., so they are not protected under the applicable provisions.
Likewise, using your computer to mix CD's into a "favorites" CD for your use is illegal, even if you purchased the music legally. Futher, using your computer to make a backup copy is illegal as well. Software is a bit different, since most EULA's allow backup, but not all.
Using a home stereo CD-RW deck is different though (like one made by Phillips, for example), since part of the price includes a royalty payment to the RIAA, and these approved and protected devices do use SCMS to prevent generational copies. Finally, you have to use CD-R 'music' discs, not CD-R 'data' discs to be completely legal when making favorites compilations or backup copies in these home stereo devices because the 'music' version includes a royalty payment (thus, why they are more expensive than the identical 'data' discs at Wal-mart).
It sucks, but that is the law. I personally think it is going too far, and they are pushing further legislation that would cover everthing from toys to answering machines. Disgusting. I think their eventual goal is a pay-per-listen or pay-per-view scheme on everything... radio, TV, streaming audio... everything.