If you use encryption (I always change the settings from "prefer" to "require" encryption on every install), the ISPs literally can't identify what you're downloading.
So the IP enforcement companies send the ISP a letter saying "this IP was illegally downloading our stuff. We don't actually have proof, but trust us and punish them."
Big surprise, a ton of ISPs just ignore them.
Edit: to be clear, I'm only saying encryption prevents your ISP from seeing what you're downloading. IP (intellectual property) enforcers who participate in the torrent are the ones who inform your ISP, but their letters to the ISPs have no teeth. Some ISPs care, but a lot just ignore the letters. You still definitely want to use a VPN for all public trackers.