Way, WAY back:
Wiretapping Then and Now
Even in the earliest days of telephones and telegraphs, people were concerned about wiretapping. In the 1860s, before the modern telephone was even invented, many state courts in the United States enacted statutes that prohibited anybody from listening in on telegraph communication. By the 1890s, the modern telephone was in widespread use -- and so was wiretapping. From that time on, it has been illegal in the United States for an unauthorized person to listen in on somebody else's private phone conversation. In fact, it is even illegal to record your own phone conversation if the person on the other end is not aware that you're recording it.
Historically, the law has not been as strict for the government. In 1928, the United States Supreme Court approved the practice of wiretapping for the police and other government officials, though some states have banned it. In the 1960s and 1970s, this authority was curtailed somewhat. Law enforcement now needs a court order to listen in on private conversations, and this information can be used in court only in certain circumstances.
Additionally, the court order will only allow the authorities to listen in on a call for a certain length of time. Even under this tight control, the practice of government wiretapping is highly controversial. Civil-liberties advocates point out that when you tap a phone line, you are not only invading the subject's privacy, but also the privacy of the person the subject is talking to.
Source:
http://people.howstuffworks.com/wiretapping4.htm
See also
http://www.fcc.gov/cgb/consumerfacts/recordcalls.html
[This message has been edited by Auburn Annie (edited September 30, 2004).]