TOR is short for the The Online Router, it works by first encrypting you information outbound and sending it through a thousand different host in the world, before it takes you to your designation host. This will make you anonymous while you are browsing the web as in it makes it near impossible to trance you in the web. It will also prevent any cookies from being saved on your computer, thus allowing zero trace of what you were browsing as long you didn't download anything.

What it doesn't protect against is you downloading anything. The content of what you are downloading may be encrypted and hidden (also depends on what you are downloading, and how you are downloading it). It doesn't prevent your ISP from seeing that you are downloading something, because it will see your data consumption. It also really depends on how secure your own network is and your computer when it comes to terms of you downloading something.

I use TOR solely to stay hidden when I am browsing the internet on a public or possible unsecure network. For instance I use TOR exclusively while I am staying at hotel and using their network. This because I have no idea who is monitoring their network. It is very possible for someone to being wire sniffing all the packets on their networks in hopes to get sensitive information ( passwords, usernames, credit card information). By using TOR it protects me from even them most expert of users of WireShark or other packet sniffing software.

To sum it up, TOR is great for what its intended to be used for, which is to browse the internet anonymously. It what really protect you from keeping what you are downloading hidden, Especially if what you are downloading is illegal. Its simple as long as you are not using TOR to commit any federal crimes, you are going be safe and protected from any monitoring your ISP may be doing on you.