Yes. Our servers check your incoming mail against known Spam / Virus signatures using Vipul's Razor, an award-winning collaborative spam detection system. The privacy of your mail is not compromised in any way during this process, since only a 'hash signature' calculated from your message is sent to the spam identification servers.
If a message is identified as spam or as containing a virus, we don't delete the message from your mailbox. Rather, we add the "X-Razor-Spam:" header, which you can use to filter these messages using your own mail reader program. If a message contains known spam as identified by razor, it will be tagged with the header line "X-Razor-Spam: SPAM".