Copyright laws define it as "deriving benefit from", not whether or not you make money. This covers demo tapes by bands/music acts etc. too - so if you produce a demo CD of copyrighted music other than your own and give them away, you pay the same as if you sold them.

BTW: I recently learned that you can only copyright arrangements if you are the original author of the song you arrange. So I cannot copyright my unique arrangements of pop & jazz standards although I can copyright the "sound recording" of them. I learned from an experienced friend that professional arrangers get around this by copyrighting their arrangements in France, which does recognize arrangements separate from authorship. The French copyright is then recognized in the US by international intellectual property agreements.