An unlicenced station is not necessarily transmitting illegally. It is legal to broadcast on FM without a licence at very low power but the range is very limited - a few tens or hundreds of metres at most. That's how those little "talking house" or business broadcasters, and those tiny FM transmitters you can buy for use around the house or in your car are legal.
Stations that transmit illegally are usually called pirate stations. In most big cities, unlicenced stations operating at illegal power levels appear occasionally on empty frequencies. That's what I think I heard today.
Details: 87.9 MHz at 02:40 to 02:56 UTC (10:40 p.m. July 28 local time). Fairly good signal. No talking or announcements. It was broadcasting what I think were Islamic prayers - sounded like a solo voice half-singing in Arabic. Went off air at 02:56.
I googled for information about this and found two references from a year ago in Glenn Hauser's DX Listening Digest about an Islamic pirate station in Toronto on 87.9:
- DX LISTENING DIGEST 10-12, March 26, 2010: "On Air: ON, Toronto, 87.9, a pirate with prayers in Arabic from the Scarborough Muslim Assocation at the Jame Bakr Siddique Masjid, heard at 74 km. Industry Canada has been notified (FMedia! Final Issue 2009-2010 via DXLD)"
- DX LISTENING DIGEST 10-16, April 22, 2010: "87.9 - Islamic prayers and talk, in mono, seems to originate from the city's northwest quadrant, perhaps in Etobicoke, Brampton or Mississauga. It carries well over a large area, despite adjacent 88.1 CKLN in downtown Toronto. I am guessing something in the order of 50 watts."