If you live in the United Kingdom (UK), and a few other countries in Europe, there's actually a few more laws that applies. In some countries it is e.g., forbidden to write viruses and trojans, even if you're just researching, and in others it is forbidden to write "hacking tools", and even have them installed! (Which is kind of a joke as telnet preinstalled in pretty much every OS, can be used for many types of hacking, including but not limited to simple buffer overflows and web application security. The time spent using this program would of course be insane compared to using more adequate and efficient alternatives of course.)
To be safe, just make sure you're not doing things on systems or networks you don't own. Keep it all in house in labs and you'll be fine. The laws vary depending on where you live.
Exactly what I would say and recommend
References:
http://tech.blorge.com/Structure:%20/2008/01/03/new-uk-hacking-laws-make-hacking-tools-illegal/http://www.theregister.co.uk/2008/01/02/hacker_toll_ban_guidance/
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