Many Australians would be guilty of buying pirated DVDs while overseas on holidays, but they are being sold here too, and it's hardly underground.

New releases, old movies, TV series and even pornography were all for sale in an illegal DVD shop operating out in the open in Sydney, and advertising its merchandise from the street.

That was until police busted the racket, arresting a 40 year old woman who allegedly runs the store.

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It's believed she was copying films for as little as 20 cents, and selling them for just $3.

According to Detective Inspective Sean Heaney Operation Dragon is there "to deter people. We have to catch them out, we might not get them all the time, but sooner or later we will get them - as you can see today."

The illegal DVD trade has become just another business for crooks. A shopfront like this can make up to a million dollars a year in illegal movie sales, and police believe that money is often used to fund organised crime gangs, and even terrorism.

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Piracy expert Michael Speck says the fake DVD trade is more profitable than trafficking drugs, and the risk of getting caught is far less.

"And that's what's so attractive to organised crime professional organisations and terrorist organisations - high revenue opportunities, low risk, high levels of anonymity, and great opportunities to use low-level street operatives to make a few quid."

Australian Actor Roy Billing warns that counterfeit DVDs threaten Australia's entire film and television industry, and millions of jobs.

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Last year alone piracy is estimated to have robbed the Aussie film industry of $600 million.

"They're buying this stuff because they actually like the movies, they like the shows, but what they're doing is taking money away from the people who create those shows, so they can't go on and create any more," Billing said.

Operation Dragon is ongoing. Information can be passed on through Crime Stoppers on 1800 333 000.

This reporter is on Twitter at @PippaGardner7