"Over the course of the next two months, each participating ISP expects to begin rolling out its version of the CAS – a system through which ISPs will pass on t

"Over the course of the next two months, each participating ISP expects to begin rolling out its version of the CAS – a system through which ISPs will pass on to their subscribers notices sent by content owners alleging copyright infringement over peer-to-peer networks." They aren't looking at your traffic, they are waiting for complaints from third parties. Third parties do this by connecting to P2P networks themselves and watching the traffic of certain files.