A libelous statement (or a defamatory or slanderous statement, which are more or less synonymous) is a lie, a statement that can be disproven by facts (and therefore not merely an opinion), which has a direct impact on someone’s reputation and image. This impact results from the public nature of the lie and the likelihood that some people believe the lie is in fact not a lie.
Most systems of law provide legal measures to deter libel and provide compensation (financial or otherwise) for libel once it has been committed.
A related but slightly different problem is the public revelation of private information which is not of public concern. This information is not necessarily false, but may be embarrassing and hence may have the same effect on someone’s reputation as libel has.
A lie as such should of course not be prohibited, and is not a sufficient reason to limit freedom of speech. Neither should the revelation of private information. Sometimes, privacy is less important than other values. Regular readers of this blog will remember the rules for limiting free speech set forth in the introductory post of this series. Some rights can harm other rights – in this case freedom of speech and privacy – in which case one of the rights has to be limited for the sake of the other right.
This choice between rights is never easy, but one rule could be the relative harm done by limiting one right or another. If the harm caused by free speech is simply embarrassment, a slightly deflated reputation, or a feeling of dishonor, then the case for limiting free speech isn’t very strong. However, many so-called libelous statements do not only cause embarrassment. People whose reputation is destroyed, either by lies or by the disclosure of irrelevant private information that is of no public concern, may lose their livelihood. So the right that is affected by libel is not only the right to privacy, but also the right to a certain minimum living standard, the right to work etc.