It may or may not be illegal, depending on your use.
When you purchase iPhoto (part of the iLife suite) or any other piece of software, you're bound to use the software in accordance with the software's EULA ("End-user license agreement"). Typically, this means that you can install and use the software on ONE computer. If you were, say, to purchase a single license of Adobe Photoshop, then install it on both your computer AND your sister's computer, you would be in violation of Photoshop's EULA, and, hence, committing software piracy (which is illegal).
As long as the copy of iPhoto you intend to install on your sister's computer is not installed and in use on another computer, you're fine.
EULAs differ from software to software. Microsoft allows you to install Office on TWO computers, but only use it on ONE computer at a time. Photoshop is a single computer, single use license, so installing it on TWO computers (even if you don't use Photoshop on both computers simultaneously) is illegal.
You don't have to download software you don't own to be a software pirate -- simply using the software in violation of the EULA makes you a pirate as well, which means you can purchase a piece of software and use it "wrong" and become a software pirate.
All sorts of onerous terms can be put into a EULA -- Microsoft at one time had a EULA for Office for Windows that stated that Microsoft could, at any time, for any reason, revoke your license and you must cease using the software immediately -- even if you still were in possession of the CD and even if the software continued to function on your computer... if they revoked your license and you continued to use the software, you were committing an illegal act and were a software pirate.
I'm not passing judgment on anyone, stating any kind of moral stance one way or another, or somehow giving legal advice (IANAL -- I am not a lawyer)... I'm simply stating fact and clarifying.
When you "purchase" a piece of software, you're actually purchasing a license to use the software. The software itself remains the property of the company that produced it, and you do NOT own the software itself -- you merely own the permission to use the software. Adobe could, if they so felt like it, demand that you destroy your CD.