About the septic tank...what I don't understand is, the average American home uses 400 gallons of water per day (source: http://www.epa.gov/WaterSense/pubs/indoor.html). So is there a drain in the tank that keeps the solid stuff in but the liquid goes back into the ground? Wouldn't that contaminate the ground and groundwater with all kinds of bacteria?
Yes and no. There is water in the tank, too, and many use enzyme supplements to aid the break down in the tank. After the water leaves the tank, it goes down to the drain field (also referred to as septic field) where there are pipes (often referred to as fingers) that have holes in them. They release the water slowly in to the soil. The soil acts as a filter for the remaining bacteria to be filtered out.
This is why people are instructed to never plant edibles near the septic mound or over the drain field.
However, now that housing developments are more common, more houses being built more closely together, officials are finding that the traditional septic design does not work effectively with increased population density.
I used to live in a rural beach town in NC. We had septic (and the house was only built in 2006). By 2012, the county had mandated that everyone would have to tie in to a planned municiple sewer system b/c the ground water table was not accommodating the increase in septic systems and it was contaminating the nearby waterways (which were certified clean waterways).