Virgin Media go to court over illegal music downloading... but how do they know?

technically it's all illegal. contrary to popular belief, even downloading something you own is illegal (something can only be backed up from the original source, not from another source (your bing crosby's xmas cd VS a friend's bing crosby xmas cd)). and to find out, they work with your ISP (internet service provider) and get the logs of all the websites you visit and where your bandwidth (downloading) comes from.. once they decide you have a suspiciously high amount of download from a questionable site/service/server, they can then log every single file you download.. ISP's will be very cooperative, since technically they are also involved, since the illegal content is going through their product.

they have been saying that since 19-plonk

Basically, you've signed up with them, they have your details, and technology, similar to the police where they record your activity. So if they find that someone has not obeyed the rules they will take action. Also you can go to the Virgin Media site and read info about it.