Security of your wireless network is for many people something that is easily overlooked, and given the complexity of getting four or five devices connected for novice wireless users it can be daunting.
TalkTalk has staged a wireless stunt which Rory Cellan-Jones at the BBC was following, whereby they surveyed a street in North London, and found while a large number of networks use some form of encryption it was the lowest level which meant that someone could exploit loop holes in the security and gain access to your network. Once on your network, any illegal activity they carry out would be traced to your connection, with you being liable, in the case of the proposed unlawful downloading proposals as they is no judicial process the assumption would be that you are trying to squirm out of it. The Department for Business, Innovation and Skills currently envisages there being some form of tribunal existing so people can appeal.
The BPI (British Phonographic Industry) appears to be confident that the warning letter system would mean that people would have the chance to secure their networks, but that presumes people would understand what happened, and in families with children, you might see parents who simply believe it was the children and blame them rather than look into the technical measures. Given the amount of wireless kit that ships with WEP encryption and is sold as secure, one can forgive the non-computer experts (i.e. the majority of the population) for believing they are secure.
The best level of encryption is WPA2, but alas not all devices support this, WPA is more widely supported, but these methods still carry the risk that someone can guess your password. Therefore it is imperative that you use passwords that cannot be easily guessed, thus avoid things like pets names, birthdays, address and go for much longer phrases.
For a guide that explains the myriad of terms and gives simple advice on how to secure your wireless network visit GetSafeOnline.Org. Other options include getting a trusted friend to help you setup the network, or using one of a growing number of commercial services that will visit your home and configure your hardware. TalkTalk run one of these services (Geek Squad), but at £99 for a home visit many people will do their best to avoid using them.