The general rule is that viewing a video is not copyright infringement. It makes an ENORMOUS difference if you download the video, as downloading it means that you have made a reasonably permanent copy of it, which is, by definition copyright infringement. Immediately deleting it after viewing it does not erase the fact that a copy was made.
On the issue of embedding a link, there is only one appellate case I know of, which is Judge Posner's recent decision in the Flava Works case. There, the 7th Circuit found that embedding a link to a video is NOT copyright infringement. However, the 7th Circuit is just one of Circuit, and I do not have a sense for where this issue will go. My personal feeling is that it should be secondary copyright infringement, and I would have no problem signing a complaint on behalf of a rights holder given the state of the law. Nonetheless, we'll have to wait for other courts to provide more guidance.
This answer is not a substitute for professional legal advice. This answer does not create an attorney-client relationship, nor is it a solicitation to offer legal advice. If you ignore this warning and convey confidential information in a private message or comment, there is no duty to keep that information confidential or forego representation adverse to your interests. Seek the advice of a licensed attorney in the appropriate jurisdiction before taking any action that may affect your rights. If you believe you have a claim against someone, consult an attorney immediately, otherwise there is a risk that the time allotted to bring your claim may expire.
Q: "Is it legal to watch copyright-infringing videos?"
A. No, watching is not copying. If it is streaming and watching, the jury is still out as to whether the buffer copy that is inherent in streaming is an illegal copy.
Q: " If I go to Youtube or a movie-watching site and watch something that contains copyrighted material (movie clips, TV show openings, TV show episodes, songs, characters, logos, etc.), am I breaking the law just by watching it? "
A: Same as previous question and answer.
Q: "Does it make a difference whether I download it or merely view it? "
A. Yes. 17 USC 106 provides that the copyright owner has the exclusive right to make copies, so downloading without permission violates the law.
Q: "I know the uploader is probably breaking a law, but what about a passive viewer?
A: "Passive viewer? A truely passive viewer would be a tavern customer watching a sports video, a restaurant customer watching a TV show on the restaurant TV, and the like. The risk of that is on the establishment, not the customer. However, video streaming is not passive, it is active. So, under the current laws, if the viewing does not involve making a copy, even temporary, that is not copying or distributing copies and thus does not violate the copyright laws. Whether streaming is found to be infringing (I predict it will be eventually when the entertainment industry lobbyists buy enough Congressional votes to get it outlawed.) or not is still to be determined.
I am not your lawyer and you are not my client. Free advice here is without recourse and any reliance thereupon is at your sole risk. This is done without compensation as a free public service. I am licensed in IL, MO, TX and I am a Reg. Pat. Atty. so advice in any other jurisdiction is strictly general advice and should be confirmed with an attorney licensed in that jurisdiction.
While I cannot give you legal advice in this forum, the answer is maybe. It will depend on, for example, what you are using to watch the video. If you are watching on your home computer and it stores all or a portion of the infringing material, you could have a problem on your hands.
THIS RESPONSE IS INTENDED TO CONVEY GENERAL INFORMATION ONLY. IT SHOULD NOT BE RELIED UPON OR TAKEN AS LEGAL ADVICE. FURTHER, THIS RESPONSE IS NOT INTENDED TO AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP.
The truth is that almost all of these issues are unsettled legally---except for one. You can watch copyrighted material on TV or in a public bar or restaurant without violating copyright law. As soon as you start saving copies, downloading or uploading copies, sharing copies, or doing anything that could be construed as making a copy, you are running a risk of violating copyright law. Also, the issue of whether "linking" is legal remains unsettled and is the subject of ongoing litigation and controversial political debate. A lot of established news and entertainment web-sites do not agree that it is ok for others to provide links to their web-site and the materials that appear thereon. They have a good argument---copyright ownership gives the owner the right to decide who displays, publishes or uses the content---and the copyright owner has the right to exclude use if his content. Therefore, why shouldn't the copyright owner have the right to exclude linking from unapproved web-sites to his content? The internet is not the wild west.