How can some users put movie or TV clips on their YouTube channels when YouTube policy clearly denies it? Who earns the money from ads on these video?

That's a great summary, Arun. I'd just qualify slightly the part about Content ID partners wrong claims on reused public domain materials . With some friends, we systematically dispute these "copywrong" claims via the procedure foreseen by YouTube. In https://www.steigerlegal.ch/2013/04/24/youtube-urheberrechtsmissbrauch-vs-public-domain/ (in German, but with relevant screenshots in English), Martin Steiger, who is a copyright lawyer, described how he got such copywrong claims for an excerpt of a public domain recording of Beethoven's 6th Symphony, and successfully disputed it , adding that in normal legal practice, the claimant is the one who should give evidence. However, as US DMCA does not require claimants to do that, I think that while YouTube's procedure for disputing unwarranted ownership claims is not perfect, it is probably the best that could be offered - and it works. Actually, while M. Steiger's dispute was underway, I published another video, "From Toscanini's 1937 recording of : Beethoven's 6th symphony", using a slightly different excerpt of the same public domain recording, got the same copywrong claims, and likewise successfully disputed them. See the description of the video where I copied what I wrote in the dispute:

From my understanding, just as you said, it is against YouTube's policy to use Copywrighted material as a part of any media uploaded to the service without written expressed permission from the owner of such materials. What I have noticed is that sometimes those who hold the Copywright to a song or video may choose to allow the media/video to remain and will add a link to where the viewer can purchase the original material. So then the next question is how do I add such a link to my uploaded media? You may add a link yourself in the description of the video or through annotations added, but as I understand it, this is not the same as if a music label runs accross the video and has these links added. I know of several YouTubers who have lost their ability to upload anything for using Copywrighted materials and others who have some videos that remain and some that are automatically pulled. You can look into fair use if you like, but it basically seems that if by using others materials that would cause them to lose money it is an issue and that only seems logical. As for how to get your materials allowed, I'd produce quality material, which the music or film industry might think they could make money on and the YouTube could brand with advertising. If it pulls views then everyone makes money and that's probably what it's all about anyway. I hope this helps.

Depends on will of the content owners, whether they do protect their rights on YouTube or not. If they do, they have to use https://support.google.com/youtube/answer/2797370and http://www.youtube.com/yt/copyright/copyright-complaint.html There are also such things like http://www.youtube.com/yt/copyright/fair-use.html and https://support.google.com/youtube/answer/2797468 .

They are not legal. YouTube knows it and copyright holders too know it. When such illegal stuff is uploaded to YouTube, copyright holders are informed. Then they can choose to get it removed or to display ads on it so earn some money. They can also choose to let it be for analytics purposes. That said, some of the channels that have been given access to upload via content ID system misuse the YouTube system by uploading copyrighted material or public domain material. Thus, YouTube considers it their property. I often face problems using public domain material on YouTube. When contacted, YouTube says it won't interfere - though it knows its content ID system is being used unfairly. I told them with references but they asked me to resolve the dispute with the concerned uploader/channel on my own. In short, 1) such videos remain on YouTube with consent of copyright holders for monetization purpose and 2) channel may be misusing the Content ID system by uploading others' stuff as it has got enters such videos through the ID system that bypasses copyright check.

There's a lot of piracy going on. However, Youtube is using advanced software to trackdown videos and music and often you see tv-shows and music videos taken down sooner or later.

Nobody should upload anything like that in the first place. Even if they do, they should not monetise anything if they do not have rights to. One may get in trouble. But, as you asked, even if the policy denies it, sometimes the owners of the content allow ads on them and get the revenue from "user generated content" (UGC) also called "user uploaded videos".To be on a safer side, you should talk to the owners of the original video and if they allow you, you can use clips of their footage in your video and monetise your video, but you may have to share revenue with them. That is also, when they allow you to monetise.I hope that answers it. :)

See, when someone uploads a copyrighted material as it is....the YouTube catches such users (by their advanced search engines) and gives them a copyright notice or community guideline notice.....In most of cases these notices states that u may upload this content on your or may use it but the original claimer of the content will receive revenue or money from the ads running on that video...and the uploader will get nothing benefit other than uploading it. So the users u discussed comes doesn't get any revenue but the original claimer getIn some cases YouTube sends strict notices to take down the video, swip the music etc. if the user doesn't does it....YouTube sends a copyright strike or community guideline strike to the user and/ or deletes the video....1 copyright strike disables some of the features of YouTube.....2 copyright strikes disable your account for monetization and 3 copyright strike cancels or bans or deletes your channel.....even your adsense account can be banned....and u will no longer be able to earn money from adsense.

How can they do it you asked? Simple, they just go ahead and do it. Youtube cannot catch everybody who violates thier policies. There's just too many people using that service and not enough staff to monitor every single video that gets posted by everyone. Now if you were to flag any of those videos then obviously youtube staff become alerted to the possible violation.

Agree with what the others have said. It will be best if you can find and contact the original content owners and take permission from them for using copyrighted material in your videos. You can also look at an option of using stock footage and stock music Many YouTube Multi-Channel Networks provide stock footage and stock music and licensed content  to their partners. If you are serious about YouTube as a business, look at the option of partnering with a MCN.