If it's distributed without a license, it's illegal to redistribute the software, or to distribute modified copies. You can only distribute patch kits which can be applied to the original codebase, which everyone must acquire from the original developers.
> Once you've legally downloaded a program, you can compile it. You can run it. You can modify it. You can distribute your patches for other people to use.
> You are free to use this software in any way, for any purpose.
This is a license. It can't possibly be anything else. It's a simple, permissive license, but it's a license. Them claiming it isn't a license is nonsense.
> Is public domain a license, or is it no license?
Public domain means nobody owns the copyright to that work. Anyone can use it for any purpose whatsoever, because there's nobody to tell them they can't.
So, no, it's not a license. It's putting something in a category where a license wouldn't even make sense.
A public domain dedication is a statement intended to create that legal status, but may in legal effect be actually a form of gratuitous license and/or promise not to sue.
Just nitpicking here, but it's not illegal [1]. It's just not allowed. (At least where I live, YMMV...)
If I just drop a disc with some code on your desk without saying a word, it is not a crime for you to do something with it. Meaning the police won't begin investigating, the DA won't press charges against you.
You still have no OK from the author - "all rights reserved" so to speak. He can always come and sue you for infringement.
So saying "there is no license" leaves all the options open for the author, putting all the risk on the user of the code. Which is pretty nice for the author, I guess. If I didn't care about adoption of my programs beyond anonymous hobbyists, I'd probably do something similar. "Look at my code. I can't sue you if you use it secretly at home, but other than that I'l make no guarantees."
This guy goes a step further and says, if you want to use his code outside of your basement, and his word that he won't sue you is not good enough, then he'll say "OK, I grant you usage under <reasonable license>". Which I also like, because it makes explicit that a license is a kind of contract between two parties, not just a label that belongs to some code (as we frequently treat it simplifying).
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[1] I realize this depends on your definition of illegal: Either A) everthing that is not forbidden is legal, or B) everything that is not explicitly allowed is illegal. Also, wheter you count just penal law or also civil law.
http://cr.yp.to/softwarelaw.html
> Once you've legally downloaded a program, you can compile it. You can run it. You can modify it. You can distribute your patches for other people to use.
... and that's it.