The mp3s are located on esnips.com's server. More media sharing companies will be added soon
It is not in your control if individuals upload copyrighted songs on esnips and other users gain access to these songs using the script. The same way it is not in your control if you were to have a youtube or stage6 script on your site and someone watches or downloads copyrighted material uploaded on these companies' servers. Companies like Youtube and Esnips warn users in doing so and either remove the copyrighted material or terminate accounts of users who commit copyright infringement. It is legal to use the script, which is installed on your host. People just need to be responsible in uploading content and ignore content that are copyrighted.