Out of curiosity do the web based file hosting services such as Oron and Rapidshare store information about who downloads what? I ask because I'm wondering, when someone is "caught" downloading something do the authorities catch them based on analyzing the traffic to their computer or is it more of the office of Oron/Rapidshare/etc. is raided and the log files are seized and used to determine who's downloading what?
Yes, web service providers of all kinds store some information about their users and users' activities. For various reasons — infrastructure monitoring, resource allocation, targeted advertisement… That information can be obtained by authorities with a warrant, subpoena, or a polite request, depending on the provider, type and amount of data. Here Google for example provides a map with requests broken down by country.
Raiding is usually not necessary, though happens sometimes. Even Megaupload provided information requested by the authorities with a warrant and held on to the potential evidence.
The situation is a little different for p2p networks. There, evidence against users is usually provided by companies doing active monitoring of the "swarm" by joining it and downloading data from users to confirm that they are indeed sharing copyrighted materials. Torrentfreak obtained some insider details a few years back and the general idea remains the same.