Simple, easy and without any bullshit.
Ad-blocking is legal and everyone has the right to ad-block the website/service.
No, because the APK as well as the modded Desktop client do not manipulate the offered services nor uses shady tricks or fake accounts to archive the goal (blocking ads).
No it's not, I use loopholes in order to archive it. I can't go into specific details (because Google would close the hole) but the decoding process is considerable not a hack to obtain high quality music. It' abuses a weakness in the encryption layer.