Torrents will still work right? I wonder what they will do about that...
Nothing, because the data is not stored on a sever, but rather shared between torrent users. Once people stop seeding, a torrent dies.
It is possible to track what people download using torrents. AFACT will send your ISP copyright infringement notices when they detect that your connection has downloaded copyrighted material, in particular movies. Then your ISP decides what to do. Most ISPs such as Telstra, Optus, iiNet etc., do nothing because they don't care. Smaller ISPs are scared and may terminate your internet connection after several copyright infringement notices.
But all in all, Australian laws make AFACT powerless to do anything substantial. If they lose the high court ruling that iiNet has purposely allowed customers to obtain material illegally, then the only option left for them is to come after individual users. This has happened in the US, however I seriously doubt it will happen here any time soon.