ipa's are the application files that iTunes recognizes as applications. Most (if not all) of the torrent's out there for ipa's are full of applications that are paid apps that people have stolen or are sharing.
It may not be illegal to have these files, since they are just the application files, but the process for adding them to your iphone is a means of getting copywrited applications on your phone for free.
I should have been more specific, because I don't believe that these apps are actually cracked, just the files that iTunes uses for applications. Anyone else that can clarify?