They're using bots to connect to the torrents' swarm, which then logs all connectable IPs. Another way is at the tracker itself. Your ISP has the abiltiy to log your URL trail, since it is the one to connect your PC to the site your connecting to, so when a company see's an incriminating file on a tracker, they get in touch with cooperating ISP's, which in turn, notify their customers that they have DLed an illegal torrent link, and are so told on behalf of the copyright owner's authority, to remove the offending illegal file(not torrent link) from your hdd & finally to "cease & desist" from DLing illegal files in the future.
It's been argued, DLing the file doesn't prove that a user participated in the swarm itself, but I guess they must consider this intent, sufficent evidence for prosecution. I'm lucky that my ISP has never sent out these "cease & desists" to it's users like many larger ISP's around have.
To protect yourself from swarm identification, you can use Peer guardian or Protowall which block the companies IP ranges from connecting to you personally, thus giving you anonimty, however bear in mind that it's recieved mixed critcism on it's actual effectiveness against these types of threats.
BT tracker's are just navigators for the seeding & leeching of files that users partake in distributing, I agree, the trackers do not distribute the actual files themselves. I only wish the courts saw it the same way as we do. I can though, understand their point, we're can only argue upon the insignificant semantics of BT topology, trackers, at the end of the day, are central to establishing illegal activity, why else label files in accordance to music, movies, games etc. How much non-copyrighted stuff would go into these catergories.
To reiterate, I'm fundamentally against holding trackers responsible for it's users actions. :iagree: