I know that historically there have been a few times when someone bought a domain in advance of a big company, knowing it would be wanted and that they might sell it for big bucks.

Does this still happen? What are the legal limitations to it-is it legal?

Of course it's legal, but you may not get to keep it or make any money from it, if that big company decides to fight for the domain.

How would they do that? I mean if they missed out, that's their problem really, so how can they forcibly make a person hand over a domain name that they legally purchased? Just curious.

Yeah, I have the same question. I think it is legal to register any domain name available, whatever it is. Can the company charge us for stealing its brand name?

The company can demand you release the name to them and they will get their way.
Cybersquatting laws are in place to protect trademarks.