it isn't about hiding away from your isp , as long as your unencrypted they can potentially see everything you download, P.G is about blocking remote computers you believe to be from untrustworthy institutions like known government agency ip ranges and media corp's.
they way your ISP knows what music/films you have been downloading is when a remote machine is also sharing the file your downloading , when you connect to that computer to gain a piece of the file it logs your IP and from that i.p your location and ISP is known, then they just contact your ISP claiming breach of copy write and your ISP lends you a letter.
pg2 can help block those known remote machines in known ranges