Do you agree that cheating on exams provides an unfair advantage? Do you think it is “okay” to tell on your peers?
I know of a case in the 80's where a workstudy was assigned to run off physics exams.  She was keeping copies for herself and selling them to students in the class.  On the day of the final exam, a student went up to the professor and handed him a copy of his final.  "Where did you get this?"  The student explained that copies of all his exams had been readily available for $50 all semester.  

So the prof made up a new exam on the spot, wrote it on the blackboard and announced to the class that because of this cheating, the final exam would now be 80% (rather than 30%) of the grade for the course.

A certain student named Mike, who had not cheated all semester and was doing well in the class ended up kind of bombing the final.  If the final had counted only 30% of the grade, he'd have been fine.  But he ended up with a C because of the new weighting.  Mike had a "Regent's Scholarship" at this school, which was worth thousands of dollars (tuition, fees, dorm, meals all paid) and which was re-newable every year.  Because of this C, Mike lost his Regent's Scholarship.  The young lady selling exams for $50 a piece cost Mike $1000's of dollars plus a nasty hit of a C in physics for an engineering major.  

This is a stark example of cheating affecting others.  But in general, when there is a "culture" of cheating, then this undermines academic standards.  In most cases, some student cheats, passes Calc I and then goes on to Calc II.  It seems like a victimless crime, but now the Calc II prof has a class that's just a bit less prepared for Calc II than it should have been.  It drags down the class a bit and everyone in the room ends up being just a bit less prepared for Calc III.

As to your question about whether you should rat out the cheaters:  Yes and no.  Yes, tell the prof that there is an unreasonable amount of blatant cheating going on and that you don't think you're being treated fairly when you study so hard and they bypass learning.  But naming names is another issue.  If you say, "Jimmy copies off Jenny on every test", there's nothing the prof can do, because he didn't see it.  You've alerted him to the problem and hopefully he'll keep a sharper eye out or make multiple versions of the exams or something else to squelch the cheating.

(The workstudy was, of course, found out and expelled.  IMO, she should have been prosecuted for fraud.)