What does PeerGuardian actually do?

PeerGuardian does two things to help P2P users. The first is the obvious one, it closes connections on certain IP addresses. The second is that it optionally logs all connections made to your computer. The reason for this is so that if you do use PeerGuardian but still get sent a legal threat, you can cross-reference the date/time of the alleged infringement with the log. This gives us a list of IPs, one of which will be the IP that's doing the busting. It's basically to help us identify which IPs are doing the busting and weren't known to PeerGuardian before. - Hope that makes sense.

Is PeerGuadian 100% Protection?

CERTAINLY NOT!!! - PeerGuardian relies on users sharing information to stay up to date. It IS contributory to protection and it seems to be the most up-to-date and open database of this nature on the internet (as far as I know). 

The more people who are using full-logging and report the relevant IPs when they get a C&D threat (see above paragraph), the more people we can save. ANONYMOUS P2P is the way ahead IMHO, PeerGuardian isn't 100% effective.. I look forward to the day that PG (not just the app, more.. the database and communication between p2p'ers on blocking IPs) becomes totally redundant. 

I'm just helping to supply the next-best thing until we get to that stage.

You can download it by clicking here.