It is legal to make a copy of a game, video music you already own.
If you are worried about damaging a game then a mod chip is good to use as you can use the copy as often as you like and it don't matter if it gets damaged as you can just make another one.
One example, I legally own over 1000 original retail music cd's, I have made copies of all the ones I listen to in my car, if my car ever gets broken into, the thiefs have only made away with a couple of quids worth of blank cd's and not £100's worth of actual cd's.
Its the same with consoles, fitting a chip it perfectly legal, after all the console is yours to do as you please. It's owning copies of games you do not own which is illegal.
Fitting a chip also allows you to play some perfectly legal import games which you can not do with out a chip.