I am just curious what Peerguardian does. I see it blocking Ips and stuff, bur what does it really do, what is it preventing? If I didnt have it installed, what could happen?
It is preventing "malicious" IP addresses from connecting to your computer.
From the PG2 site:
Quote: How safe is PeerGuardian, really?
Well, it is accurate in the sense that it blocks everything on your blocklist. It is impossible to know _all_ the addresses to block so while it will increase your safety to a good extent, it can never be perfect.
It depends on which blocklist you are using, but since you are posting here I assume you are using the list that blocks anti-P2P groups (MediaDefender, MPAA etc.).
PeerGuardian uses the blocklists of BISS (Bluetack Internet Security Solutions).
These lists contain the IPs of "known" anti-P2P groups.
There is controversy over whether the list does anything useful or whether it is too broad.
I personally believe it is worth using.
There was a study done where it was shown that if one is downloading copyrighted material and not using a blocklist, the chances of being tracked by an anti-P2P group are 100%. Article is at ArsTechnia.
There are some groups, that are not affiliated with copyright people, who interfere with P2P.
PeerGuardian is intended to block both these groups and the copyright people from connecting to you and seeing your IP and/or sending bad data to you.