Answer: More often than not, people do not want to reveal their salaries, in either a business or personal setting. One's salary feels like it should be private information. However, inevitably, if a firm in interested in possibly making you an offer, they will want to know your current salary, along with all sorts of other information about your work that you will need to provide.
In my experience, the main concern candidates have about revealing their current salary is that the firm with whom they are interviewing will make them an offer for a lower salary than they might have otherwise, based upon the current salary. However, surprisingly, the reverse may also be a concern. A candidate may be hesitant to tell a firm with whom he or she is interviewing their current salary because it may be higher than the firm wants to pay a lateral associate.
This latter scenario can occur for a number of reasons. The candidate may be working in a geographical region that has a higher income bracket, but may want to relocate to a region with a smaller income bracket. Or, the candidate may be interested in transitioning his or her practice from a larger firm to a smaller firm, and the smaller firm pays at a lower salary scale. In both of these situations, the candidate is willing to accept a lower salary in order to achieve another goal.
In most, if not all cases, a candidate does need to reveal his or her current salary before receiving an offer from a firm to make a lateral move. The firm wants to know the candidate's current salary for several reasons. One it gives the firm an idea (in theory) of what the salary expectations of the candidate are. Two, it gives the firm (in theory) an idea of where the candidate's current firm places the candidate with regard to factors such as class year and skill level. Three, it gives the firm (in theory) a ballpark figure of the salary level the firm needs to offer the candidate.
While some candidates are interested in making a lateral move because they want to make more money, there are many that are willing and even happy to take a salary cut to transition to a desired position or location, or both. If you are one of these people, make sure that you and/or your recruiter convey to the firm your interests and expectations. Believe it or not, in my experience, firms are hesitant to make an offer to a candidate that is lower than the candidate's current salary. Firms may even pass on a candidate for this reason alone!
Remember, as a general rule, don't discuss salary during the early stages of interviewing. But when the time to discuss money comes along, be open about your expectations so that hopefully salary level will not impede the firm making an offer.