Yep. If the music plod came round and asked about the choons on your iPod, if you have all the CDs in a box somewhere they will most likely leave you alone.
If you have no CDs at all, then they are likely to want to see your iTunes account. If that's empty, expect a call from the BPI's legal team...
To be perfectly honest the chances of the above happening are rather rare. Just don't go getting them excited by using filesharing websites / torrents etc...
Me? Everything that is on my iPod is also on CD/Vinyl back at my house. I believe that if I like an album enough to warrant putting it on my pod, then I like it enough to purchase it.