What does this letter mean?

From Digital Economy Act Info

Well, if it specifically mentions the Digital Economy Act, it probably means you're first in the UK to receive such as letter (although similar one threatening prosecution under copyright laws have been sent for some years now) as there are no reported cases of the the letters being sent yet. Firstly if this is only your first letter, don't panic just yet, the act mentions being sent 3 letters before facing "technical measures".

The first step you should take is contacting your ISP, asking them what they believe you did, what evidence they have and how they can avoid further letters. Ask for whatever information they have linked you to the copyrighted material, what the material was, who the complainant was, precisely when the infringement took place and what measures they took to determine an offence had taken place.

Also, let us know, so we can start to inform people of what the letter contains and formulate some clear advice on responding to it.

Please Note: Whilst not connection to the Digital Economy Act, a number of law firms have sent out threatening letters on behalf of copyright holders alleging file sharers of copyright infringement. The law seems to indicate that they must prove that the name individuals (not just their internet connection) was responsible and their methods of determining infringement have been criticised as highly suspect and inaccurate (as their proof seems to be based solely around the recording of IP Addresses). Law firms reported to have used this tactic include Gallant Macmillan LLP Solicitors (Gallant), Davenport Lyons, ACS: Law Solicitors and Tilly Bailey Irvine. User who have received communications from one of these types of organisations should visit BeingThreatened.com for further advice.