Servers co-located at exchanges for the purposes of low latency algo trading would primarily listen to the exchange's feeds.
The feeds would generally be disseminated via multicast on a fibre network. Certain exchanges charge a proximity fee based on the length of the fibre to the trading server and others make all the fibre cables equally long. The feeds would generally use a low latency protocol such as ITCH. Obviously if the algo requires certain financial indicators it can fed to the server via external feeds into the co-location space.
If multicast feeds are used the feed can be subscribed to on a router / software level at a multicast group level. If the exchange disseminates Level 1 on 1 multicast group and Level 2 on a separate group, you can elect only to receive Level 2. This can also be on a partition level.
If TCP is used feeds can be subscribed to on a security level.
FIX market feeds are generally never used for low latency trading. Certain exchanges such as the LSE however do provide Level 1 in FIX using FAST. Even though still owned by the NYSE, ITCH is becoming a prevalent standard in exchange level market feed data dissemination. Other feeds such as the FTSE index feed are gravitating toward FIX over FAST.
On the private message flow side there is definitely a move towards standardizing the message flow to approximate FIX even if it uses a native protocol for speed. Ie All new exchange trading systems will generally always have a New Order message that results in an Execution report being returned. Look at the JSE just gone live or Eurex system going live in December. Both have native layer that maps very easily to FIX.