It's a custom built packet sniffer, BFD. They acquire a subpoena to gather the information and put a black box at the ISP that sniffs data that matches the information contained in their subpoena. Hell, your ISP sees more dirt on you on a daily basis than the FBI does.
How do I know so much? There was an entire chapter on it in my Ethereal book. It's a packet sniffer, that is all. Nothing more, nothing less. Does it allow for some amazing data capture and granularity, you bet. Huge, black ops secret? Nope.
In fact, there are COTS (commercial off the shelf) applications that do the same damn thing, only they haven't been blessed off on by the government to include some of the highest ranking judges and attorneys in the nation.