In plain English, this means Sharman agreed to pay cash to make the various copyright infringement lawsuits go away. Although some details of the settlement were held back due to secret agreements not disclosed in public court papers, those involved with the proceedings, speaking under anonymity, said Sharman agreed to a $115 million payout to music companies, and a smaller amount to motion picture companies. The same sources said Sharman already paid most of the money to the entertainment companies.

Sharman’s Kazaa software is one of the most popular file-sharing clients among P2P users. The company once boasted that its software had been downloaded more than 389 million times.

But the recent settlement doesn’t mean Sharman and Kazaa will just disappear. In announcing the settlement, Sharman CEO Nikki Hemming made it sound like a triumph for both sides.

“It has been our longstanding goal for Kazaa to play a significant role in the growing market for licensed online distribution and authorised exchange of copyrighted content using peer-to-peer technology, and this settlement ensures that we will be working together with the content providers to the benefit of consumers, businesses and artists,” Hemming said.

Although Sharman pledged to play nice, there were no details as to how the company would prevent copyright infringement via Kazaa. Instead, Sharman indicated that it would negotiate for licenses similar to those that cover online services such as iTunes.

Filters are expected to make up just some of the tools Sharman will employ to keep its users from swapping copyrighted works. But so far, the P2P network accessed by Kazaa – the Sharman-operated Fast Track network – still contained copyrighted material free for the taking just hours after the announcement.

But you can bet the entertainment industry will keep a close eye on Sharman, as well as other music-sharing companies.

“While the award may seem like a vast pot of money, it will merely offset the millions we have invested – and will continue to invest – in fighting illegal pirate operations around the world and protecting the works that our artists create,” said the vice chairman for EMI Music, David Munns.