First, some basic background. VNES (stands for Virtual NES) is an online NES emulator, written entirely in java. The site, based in the US, has a huge catalog of original NES games, which are completely free to play online (no downloading required). Now, obviously a whole bunch of legal questions come up here, most notably the claim that this is massive copyright infringement. The vNES legal page attempts to address these claims, and provide a justification for the legality of the site, through six main points.
One of the most notable arguments is the claim that the website constitutes fair use. It states that the website is noncommercial, only uses cartridges out of the market for 15 years, keeps copies of entire works, and that it holds works "vastly technologically inferior" to modern works (and then claims that these facts sufficiently satisfy the four factors). It also claims that, under Sony v. Universal, this emulation simply constitutes time-shifting, and therefore must be fair use. But by far the most interesting claim that they make is their classification of themselves as an archive (under 17 U.S.C. § 108). As an archive, the claim goes, they should be able to make their works available to the public. Also, they only provide games that they have physical copies of in their offices.
Now, their fair use claim in tenuous at best. The fact that they use entire works actually hurts their case as opposed to helping it, and just because the works are "vastly technologically inferior" to modern games does not mean that companies cannot still profit off of them (as remakes clearly demonstrate). Also, this isn't time-shifting so much as space-shifting, and the legality of space-shifting is not well tested in the courts. However, the archive claim is interesting, and could provide a valid loophole for emulation sites to provide video games to consumers. It relies on the games only being playable online though (no downloading (other than normal, incidental downloading) is involved). And the site has been contacted by the ESA (after which they removed all games for which they did not own physical cartridges), so presumably the industry is aware of it. This could provide an interesting middle ground for video game companies and consumers.