Almost all of us are in this hobby for egoistical reasons. We attempt to replicate a beautiful part of nature in our own homes, because it pleases us. This includes taking animals out of their natural habitats and placing them in an artificial habitat. It is my ethical viewpoint that this is only acceptable when we combine heaps of love and respect for these animals with our own egoism. Unfortunately, this is not the case for all, and I believe people that do not attempt to optimize conditions for their animals should not be allowed to keep them, whether they be horses, cats, dogs or fish.
I used the word optimize above. It is clear that we cannot replicate the natural reefs perfectly, but it is certainly possible to come close, or to come very short indeed. We should try to optimize the conditions to reflect their natural habitats as closely as possible. This is important, because it matters to the animals how close we get. Only when we succeed are we caring for our animals because it is not necesarrily the same to them whether they find themselves trapped in a 40 g tank or a 200 g tank.
I say necesarrily because their requirements differ greatly. None of the fish we keep require the "whole ocean" as their habitat. It annoys me when people imply they do. Clownfish only uses a few square meters. Tangs a lot more. Whale sharks a whole lot more than that, again. But all fish has a certain requirement when it comes to space, and it is our job to investigate this and set up our tanks accordingly.
I also used the expression the same to them. This may unfortunately be interpreted to them having human emotions, which they don't. I don't believe blue tangs in a short tank are "unhappy", or that they are "happy" in a long tank. We don't treat them humanely (oh the irony) because we want them to be happy, but because improper treatment may lead to stress, diseases, physiological defects, metabolic problems, illnesses and death (yes, overlap between many of these terms), and this is contradictionary to loving and respecting them. It is unethical, and in most cases and countries illegal, to mistreat other animals.
Some argue that if the fish grows and swims it is fine. They even say "it looks happy". The fish does what it is evolved to do. Existing in an inadequat environment does not always mean that the fish will roll over and die immediately. There is no evolutionary reason why a fish, or any animal, should just give up. The fish will only stop swimming when it starts bumping its head in the walls, or when disease strikes. But then it is often too late. The fish will continue to eat even when it is caged, because there is no evolutionary reason for it going on hunger strike and further decrease its survival probability by adding undernourishment to its troubles. It may look happy to you because you compare it to humans that often forget to eat when stressed, or believe it has some sort of disease that prevents it from moving suffciently to catch food, but this is wrong. It is neither happy (or unhappy) nor treated with love and respect.
It all boils down to love. If you really love the nature you try to replicate you should realize that this implies that you need to treat the animals decently, and this means that you should offer them an artificial environment that as closely as possible mimics its habitat (not the entire ocean!) in the wild. If this is too much bother than I think you don't really love the animals, you just like to look at them and may I then suggest you instead buy yourself a reef DVD?