When your downloading torrents, like SickFinga said, it is recorded that you were there, and downloaded file "X".
If the police want to know who was DLing illegally, all they need to do is serve a warrant for info to whichever place you got the torrent from. It's not like they have your phone line tapped, and if they did, they would have a warrant for that too.
I don't understand how a lot of people think that getting caught doing illegal activities is wrong. Whenever you visit a web site, it records that you were there, your IP can be tracked you know. It;s not that hard.
Basically as long as a warrant is served to whoever, for whatever info, it's legal. Then they track everything back to you, and issue a warrant, or whatever to you.
Oh, anybody have a tinfoil hat i can barrow?