Disk space is so cheap right now this doesnt suprise me. Plus with things like bit level backups, mass storage becomes even easier.
As for monitoring your files, they have too. The law requires they monitor for things like child porn and other such exploitation. So MPD can't upload there
They won't report you for things like software uploads or mp3 uploads. They're going to report their service as an online "backup" utility. There's nothing illegal about owning mp3s. Now if half the planet starts downloading your pirated copy Snow White on Ice, they may remove it so they don't get bitch slapped by disney. They're not going to report you though.