For instance, I've just located a naughty guy sharing a file named "kiddy porn..." (2MB or so).
I can see this guy's IP address is *4.165.3*.6*
I went to http://www.arin.net/whois/ and saerch for this IP address.
I got an address of a college (both mailing address and an e-mail address) located in East coast of US.
So, from this, I can say that this guy is using a college network to share the file. Most likely, the college will not like to have this kind of activity under their nose. All I need to do is to notify the college the exact IP address which I found (i.e. *4.165.3*.6*), and the content of what this user was sharing. The administrater can do the rest. I don't need to know who this guy was. The college will handle him/her appropriately.

Of course, not every IP addresses are disclosed. Also if the user is using a dial-up system, it'll be harder to locate (although you will still get the provider).