The illegal version would be the one with the prostitute beating and sex in it, its all implied really.. If you have the PC version just change all your regional settings to English(United States) instead of Australia and you can see the game in its full flare.
I think the bits they refer to as illegal are the ability to flag down a hooker on the side of the street and drive around to an alleyway, have sex (the car starts bouncing around like crazy and your money goes down, health goes waaay up), then jump out of the car and beat the girl to death and take the money back. This also happens in a mission..
I guess everybody knows that the games creator's can call this moral because noone actually dies in GTA, the ambulance comes past and they get up and start walking again.. Revived by the boys in green..
But really, you guys have to GOT to try it... Its a fantastic game.. I loved the first one and this version has brought it all back for me better looking, playing, more stuff to do, heaps of different views (not just the traditional over the top look from before)
King game.. try it!