The ASIO spy agency is asking Australian ISPs to log all the data that travels to and fro from a users computer. This would require an astronomical amount of storage space if this is to be taken literally. But they are just interested in fighting terrorism by monitoring all Internet traffic that passes through Australian ISPs. An ISP would be forced to keep all the data transferred by its customers for two years for retroactive spying if the person comes under suspicion for any terrorism related activity. Storing two years worth of Internet data for even one person, especially if they were using the National Broadband Network and they were a heavy user of Bittorrent software like uTorrent or Vuze. They would need to build huge data centers at huge cost to store all of that data and they would be forced to decrypt any encrypted data.
That depends on whether the owner of the data was willing to give up the encryption keys. Even 512 bit encryption would not be easy to decrypt. In the United Kingdom, there is a new law that will force people to give up their encryption keys or face jail time. That will probably be enforced in America as well. Some encryption like gpg(1) for Linux and the PGP Windows equivalent allows very high levels of encryption and the data is safe unless the owner is asked by a judge to reveal the passkey. ASIO wants less government oversight into their activities whilst increasing monitoring of all methods of communications over the Internet. The Skype software is alleged to have software backdoors built in allowing surreptitious snooping of all calls made through the service.
All of this is in the name of protecting us from terrorism, but the TSA and Homeland security hassling people wanting to go about their business with radiation emitting backscatter body scanners and intimate pat down searches that are a violation of privacy and human rights is the real terrorism. There have been no real terror threats since 9/11 and yet we are increasing security and bringing in increasing levels of intervention into privacy and forcing four year olds to consent to an aggressive pat down search just because she ran back through the cordon to hug her mother. The terrorists have won in America, the people are scared and nervous all of the time and are feeling less safe than they did before 9/11 even after all of the security measures that are supposed to protect them.