This answer mentions AirBNB technically being illegal in New York and that causing issues sometimes with unprompted withdrawal of rentals. Are they legal in Canada, and specifically Toronto?
There's an Airbud interpretation of laws that goes along the lines of "There's no rule that says a dog can't play football". Or in XKCD's interpretation:
There's a great Canadian article on it on Canada.com, where it comes down to being 'murky'. They point out the NYC rule, as well as when a landlord says you can't let your place out, or finds out you are and can kick you out. In the end one of their renters gave a quote which sums it up:
Of course, that's as a guest.
Fortunately, if you're a guest, you're probably not the one in hot water if it isn't allowed. It'd be like a regular hotel forgetting to renew their license. However, consider...
As someone letting out their room, it depends if you own it. If you yourself are a renter, one would want to check your letting agreement with your landlord. Mine have had specific clauses saying guests staying longer than x days need to be verified, and no subletting is allowed. If you really wanted to be sure, check with your landlord as well. He's getting his rent, and as long as you're not wrecking, many would be ok with it. Some obviously won't, however.
And that's where the problem lies. IF they do get into trouble or it turns out to be banned by their lease, you may find yourself getting turfed out, or turn up in town only to find you have nowhere to stay.
However, the majority of people are reporting great experiences with it. I'll be using it when I visit Australia in November.