First, some legal bits: It's not yet illegal to have and run a console emulator. The trouble is in getting the ROMs for games that you want to run on the emulator. While it's legal for owners of a game to personally create an archival backup copy of a game, it isn't legal to get ROMs or image files off the net, even if you legally own a copy of the game. You have to own the game yourself, and make the copy yourself. That's toughest on the cartridge games, but with Sega CD and Dreamcast games, it's not too hard to get software like ImgBurn that lets you personally rip iso files from your original discs.
Again: It's only legal for you personally to make ROM or image copies of a game you own. It's illegal to download, share, or host ROM or image files of the games themselves.
(EDITOR'S NOTE: Main source for this writeup can be found here.)