The practice you speak of is known as hidden city ticketing. That is you buy a ticket from point A to C, connecting in B, and you actually leave the airport in B rather than continuing to C as you are ticketed. As you mentioned, this can sometimes be less expensive than buying a ticket from A to B.

The practice violates airline rules, though it is not a criminal (or illegal) act. In theory, an airline perhaps could take someone to court, in the civil court of course, and try to revoer the actual cost you "should" have paid from point A to point B (what you actually flew). However, such a court action is extremely unlikely, and its even more unlikely the airline would win......but anybody can sue anybody so it could happen.

If you do this rarely, with any one airline, then nothing is most likely to happen to you. E.g. if you do this 1 to 3 times a year.

You should be aware, however, that once you miss any flight in your itinerary, the computer (depending on the airline you are using) may cancel any other reservations held in the record. E.g. your entire connecting and return reservation would be cancelled. So if you try to use the hidden city ticket on the return, you might have difficulty. Whether to allow you on the plane for free, charge you $75, or charge you full fare would be at the discretion of the agent you happen to deal with when you check in.

If you often do hidden city ticketing, it is somewhat likely the airline will audit your frequent flyer account. They may take miles, lower your status, or otherwise disquallify you from all or part of the FF program. Again, this is a lot easier and cheaper for them than trying to take you to court, and it throws the ball back in your court (e.g. you would have to sue them to get your miles back). Delta Airlines, in fact, has a department called the Revenue Protection Unit RPU (aka the cust audit department). Search the DL board for the word audit, and you'll find stories you can read over about DL. I would say that AA and UA, because of their size, also probably have similar departments, though most airlines have some employees who try to deal with customers who violate the FF rules or the fare rules.

If you search for the phrase "hidden city" on FT, you'll also find a lot of debate from posters on whether the practice is ethical, what recourse the airline could/would take, etc.

Pro Hidden City Argument: Suppose you go to McDonalds and buy a happy meal. You decide not to eat the cookie that comes with it, and you throw the cookie away. Would McDonalds charge you extra money, because you did not eat or consume the contents of the Happy Meal? Of course not, so then how can an airline even think to charge you if you voluntarily don't use all of your ticket coupons.

Anti Hidden City Argument: The airlines operate on a hub and spoke system, etc. Fares are not related very much to the distance traveled, and more relate to the market. If everyone used hidden cities, this would cause financial ruin to the airlines. Furthermore, the airline has the right to charge and price its goods as it so chooses, and it has a right to pursue those who knowingly and actively violate the terms of its contracts as any other business does.

I have little to no personal experience with the using of hidden cities, so others will have to fill you in on the details from the field.......though many are "nervous" to admit airline wrongdoing on these boards. If history is any predicter of the past, you'll also see a debate in this thread start on whether hidden city ticketing is ethical, and what can happen to those who choose to do it.