It's "illegal" (I'm not entirely sure it's actually illegal, I don't know) because when you pay $60 at Gamestop or wherever you're not buying a game, you're only buying a license and that license only allows you to do certain things and puts certain responsibilities on you. One of those things the license explicitly forbids you to do is copy the content on that disc.
That means the content on the disc is not yours and that license expects you to take good care of your product. If you wreck your car, Ford is not going to buy you a new car. If you drop your hamburger, McDonald's is not obligated to give you a new hamburger. If you drop a plate, Target isn't going to buy you a new one. If you scratch your disc, Activision is not obligated to give you a new one. All of these assume your own negligence and it's only your fault if you break them.
I'm not trying to say don't backup your games or say piracy is wrong, that's another thread, I'm just saying the reasoning behind it. It's your responsibility to keep your disc in good working order. If you choose to do that through backing up, so be it, just know you're breaking some sort of terms of use.