Just last year, Charter Communications introduced a deep-packet inspection (DPI) program to gather information from subscriber traffic that online ad firm NebuAd would have used to deliver targeted advertising. Aborted due to the widespread outcry, the program nonetheless illustrates the power of today's filtering technology.
According to EPIC, "DPI provides ISPs with access to the content of all unencrypted Internet traffic that ISP customers send or receive." DPI used to be logistically infeasible on a large scale due to the resources required, but that's no longer the case.
Basically, if unencrypted files are coming through your pipe, your ISP can read them. And since most e-mail, browsing, downloading, and media streaming is not encrypted, your data and your privacy are at risk.