If you can't afford to pay someone for work [edit: in the US, can't speak for other countries], it's illegal for them to work for you. It doesn't matter if they're a student and you call it an internship, even if they get credit for it.
Perhaps you misunderstood me, so let me state it another way: you must pay people who work for you, even if their title is "intern." To do otherwise circumvents the minimum wage laws.
There's often exceptions for interns. I don't know about the US though.
It's a common dodge in Australia to put people on as "trainees". I think it can be illegal if they aren't really being trained, and there's lots of other rules (like it must be an educational course requirement).
There is no exception in the US. The only way a company can have an unpaid intern in the US is if that intern does no productive work for the company - that is, they don't profit from the intern's labor.
My understanding is that it's actually rare for tech companies to violate this law. But I have heard that it is common in the publishing industry. See: http://news.ycombinator.com/item?id=2412255
That is an exception - US interns just can't be "productive". FTA: "50 percent of graduating students had held internships". Face it, most of them will be doing unpaid clerical work. It will be "educational", in that they will gain valuable office skills, but it won't really be legal.
