A few answers
A visit to several previous BPI and/or VM posts on lotsa boards supplies a few answers to the questions raised on this board.
How it will work:
Someone working for the BPI will download a torrent listed as something that is copyrighted to the BPI, say the latest Coldplay album, and make a note of and log any ip addresses from seeds/peers that are also sharing that torrent and check them against VM's IP listings. Lisitngs that do not show, user details.
If the torrent turns out to be real, i.e. it is Coldplay's album and not a piece of virus ridden Spyware, than the the IP addresses that the BPI have noted will be passed to VM, thereby VM get round those pesky data-protection laws, because they're NOT handing over free access to their user accounts (at least at this stage).
VM will check those IP addresses and if they are indeed VM's then they will send out a warning shot - i.e. badboy, don't do it again - and place a flag against your account.
A second infringement will get you a nastier letter (and presumably a bigger flag) and a third time will get you cut off from VM and your details handed to the BPI for a REALLY nasty letter and possible legal unpleasantness.
By doing it this way VM can argue quite successfully that they're both protecting their users' accounts from the BPI and also stopping illegal activity, without having to scrutinise every 'packet' that crosses their systems.
In addition as the BPI are effectively downloading files that they own, they're not breaking the law, even though they're using the same process as the torrenter (is that a real word?) They are also not seeding the original torrent, so they can't be accused of Entrapment.
The UK and European Data-protection acts have a myriad of clauses that allow for data-protection laws to be over-ruled in the case of suspected illegal activity by an individual, (especially concerning anti-terrorism laws, but 'general' illegal activity as well) and before any American's start laughing, I'd just like to point-out that USA did have tougher rules than us, but then the Patriot Act came along . . . and data-protection over there is now a contradiction in terms! Remember, what happens here happens there next week . . . be warned.
The upshot is:
a) This is actually a very elegant and effective way of stopping illegal activity, without stopping all torrenting activities. Much as I might dislike it, I have to applaud the simplicity of it.
b) This might be viewed as a great way of getting out of VM's long-term account sign-up - if you don't mind the risk of a big ol' fine and a possible holiday at one of her majesty's fine correctional facilities that is.
c) Peerguardian type stuff won't work, because they only stop lists of known IPs from monitoring your traffic, or bounce you round a series of worldwide servers so you can't easily be tracked, but in the end you need a real IP (which is shown in just about every torrent client) to receive/share a torrent unless 1 or 2 kb per minute download is something you really really really enjoy, as the Tracker will not be able to verify you and deal with you accordingly.
d) Newservices such as easynews.com are going to have a very lucrative time of it, because your IP isn't shown to anybody else when downloading.
If you don't want the consequences, stop using P2P illegally (at least if you have a VM account) or go 'old school' and start using a newsnet service. Perhaps one like VM's own at news.virginmedia.com.