There have been some good explanations and analogies put forth here. I like the one using the Brady Bunch kids.
There is one more thing that Bram Cohen, creator of BT did, though. He was bugged by the fact that the Gnutella network clients like Limewire allowed people to turn off sharing. There were many fewer people sending data than receiving. He keyed the priority in the “swarm” of traders to the person’s upload. The more you give, the more you receive. This alone was almost enough to revolutionize file sharing.
So, to recap: You search a website for a file that claims to be what you want. What is actually being traded is unknown to the search site; all it knows is there’s a file with some tracker addresses and a title.
You DL this file, open it with your Torrent client, and it automatically connects to the trackers. They give you addresses across the world of people who are trading this file. Your computer sends a message of “I’m the new one here. Please send me something so I can start to join in.” I’ve seen swarms of over 50K people, after the season premiere of a popular cable show set in New Jersey a few years ago.
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Everyone is sending something to everyone. The torrent clients know what pieces to request, at least as the file comes toward completion. I don’t know if you’re getting essentially random parts at first. I assume that your client is willing to take any part it doesn’t already have, which at first is almost everything.
The people with the whole file are called “seeders”. The rest are called “peers” or “leechers”. Of course the best swarms have the most people, especially the most seeders, as there is more chance of getting the key last pieces of the file, and seeder aren’t clogging their data pipes with downloads (at least not of that file).
There are private trackers, which require signup, and which often strictly enforce a sharing ratio. Should your DL to UL ratio fall to 70%, say, you will be restricted or even cut off. Most of these allow you to buy your way out of your trouble, and use the money to pay the server bills. The advantage of these trackers is that since people are encouraged strongly to seed the file, DL speeds improve. I’ve seen 1MB/s on British shows on my private tracker. (Relax, admins: it’s shows that you can’t even get in N. America.)
Many of the public search sites have gone down in recent years. Digital Distractions, specializing in British shows and more documentary-type shows disappeared. TorrentSpy is gone. Perhaps tied for the most famous downfalls are Mininova.org not being able to satisfy the Dutch courts that they could filter out torrents leading to copyrighted material, and the administrators of The Pirate Bay actually going to jail in Sweden. TPB is still operating (IIRC, the site moved to a server farm out of the country), but Mininova has cut loose their main database and now only shows torrents for files that have been uploaded by the copyright holders. This means that there are mainly just bands and films you’ve never heard of, whose creators just want to get noticed. There are also some public domain things like old NASA footage.
It seems that many of the industrialized countries have court systems that are interpreting the law as prohibiting even the encouragement of illegal downloading, which is an important distinction. The site admins pointed out that they don’t know what file is actually being traded, but that is starting to come up short.
On the other hand, BT completely unhooked file trading from a centralized system. With fiber optic to your house, and a $2K computer, you too might be able to be a serviceable search engine for torrents, or a small tracker. The actual .tor files are very small, and as noted above, the actual file data bypasses the tracker, making the transfer as efficient as possible.
As for not maxing out the data pipe at home, every client I’ve seen allows the setting of maximum upload, which as I said also restricts the download. Of course, you could just stop a file’s DL if it’s preventing others from getting online.