It's frowned upon because sometimes roundtrips are sometimes less expensive than one-ways (and people take advantage of that), but isn't against the rules.

You don't have to notify the airline, but it wouldn't hurt if you did. I like to do it so they can free up the seat. In the past I've been able to apply the value of the unused portion to another itinerary, but the change fees are now so high that it usually isn't worth the effort.