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The type of small or large scale piracy that goes on with existing file sharing services won't really change all that much with this service imo.
It might provide a little more protection to small scale sharing since you could as Ralph said, share a file with a friend without fear that an automated search will flag it up. However, that level of assurance/protection has been available with just about any existing file sharing service by means of using something as simple as password protected zips.
Really what this change does is help Mega avoid the risk of a future site takedown because they can't know what is been shared and as soon as they do know i.e a takedown request comes in, they can remove just that one particular file or user and don't need to look for similar files across their entire site (indeed they can't).
A possible side benefit is should a data breach occur as happened with Drop box where users could access any other users account and look over all your files, the encryption would limit the damage done to any particular user.
I don't really think it will change the level of piracy that occurs. However, I do think ALL file sharing sites should provide file based encryption because of the above data breach protection.
* When I say can't I don't mean it's impossible. As mega only needs the password to obtain the encrypted keys which are stored on their service, they could acquire this in a number of ways for a specific user if they were compelled to do so, but across their entire userbase in order to do automated black listing of files, not going to happen (imho).
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