All we do is see which sites are using the most bandwidth and then see the files using the most bandwidth, they're often illegal. It's almost impossible to find all illegal files as there actually are legal MP3's, videos, compressed files, etc.
Yes, keep an eye on bandwidth. Illegal material and pornography are the two main culprits that eat through bandwidth. If you don't host pornography, then it should be easy to spot. Also, run some cron scripts to search for certain file extensions.