VPN questions: privacy/torrenting

I've been reading a little about VPN lately and I have some questions.

I can't seem to wrap my head around how a VPN is beneficial in privacy. I realize it encrypts data being sent of the internet, but how does it protect you from someone you are downloading from.

Let's say I'm downloading Anodyne (a free game being promoted on the pirate bay this weekend), and let's say the developers of Anodyne want to gather some information by tracking those downloading from them. They would have my IP Address and know when and how long I downloaded from them, right? Or, would a VPN some how protect me from them gathering this information?

Also, in a home environment, how would a VPN be setup? Is it pointless to have a VPN running in your home since your IP would give you away? Should you have the VPN offsite? Or, maybe just a proxy server offsite?

Do you need a dedicated computer running a VPN?

For Instance:

My PC > VPN (on it's own box) > router > internet

or is it like:

My PC (running a VPN) > router > internet

Lastly, I understand that using a VPN can slow down your connection. Is there a way to make only certain programs use the VPN? Like maybe I use Firefox for private browsing protected by the VPN, but then I use Chrome for streaming videos on hulu.


Any insight would be greatly appreciated, and I apologize if I'm completely off base.