One way to tell if the email monitoring is enabled is to look at the bottom of an email message you have received, and it should say something like this:
Incoming mail is certified Virus Free. Checked by AVG anti-virus system (click here). Version: (Your Version) / Virus Database: 279 - Release Date: 19/05/2003
I think it does scan the emails, but I tend to scan any attachments in the emails manually as well before opening them, just to be on the safe side, even though it probably doesn't make the slightest bit of difference!