Was this counterfeiting? Most certainly not in spirit, nobody was trying to say "here's a free/discounted copy of Windows" - there were no cracks on the media and you still needed a license to get Windows to activate, but the cold hard truth is the license agreement prohibits copying/redistribution of the installation media.
Lesson of the day: copyright law is stuck in the 1800's in many ways, so don't test your luck and ask Congress to fix it if you think it's broken.
If you had to restore a PC 10 years ago, your only options were to obtain a restore disk from the PC manufacturer, use a restore partition on the HDD (assuming it was intact) or buy Windows.
In the past, I had to get restore disk images on BitTorrent to fix friends computers.