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"Sherry Natoli is followed everywhere she goes while shopping online, but she doesn't mind at all. Natoli, who owns a seashell business in Tampa, does all but her grocery shopping on the Internet and even opts in whenever she's asked whether she's willing to have her online movements tracked by websites." Companies have been monitoring our online behavior for almost as long as there's been an Internet, often using our online footsteps (cookies) whenever we search, browse or buy online. Tracking technology has advanced so much that everything from how long we linger over a product description to whether we are searching for sexual-dysfunction drugs can be collected and stored on individual profiles. Our profiles are numeric descriptions, not our real names, but in some cases, it's not hard to determine personal information behind the numbers. Privacy concerns abound, and several privacy and consumer groups are urging Congress to enact laws on what can and can't be collected and for how long.

The purpose for all of this online snooping is singular: Google, Microsoft, Yahoo, Apple, Facebook and others are intent on delivering more relevant online ads to each and every one of us - and bagging that advertising money.

Former Booz Allen Hamilton management consultant Melissa Hathaway's much anticipated 60-day review of U.S. cybersecurity policy is scheduled to hit President Obama's desk this Friday. All eyes of the tech security community will be watching. It will signal what approach Obama will take in the complicated task of stemming cyber threats. Obama has said he will make the Internet safer for citizens and businesses, while playing catchup to China and Russia who are far ahead in the cyberwarfare arms race. "We're trying to do cybersecurity in a democracy," says Leslie Harris, President and CEO of the Center for Democracy & Technology. "Doing cybersecurity in China, my guess, is a lot easier." CDT held a press briefing this morning at which it warned that a cybersecurity bill, introduced earlier this month by Sen. John Rockefeller, D-W.Va, and Sen. Olympia Snowe, R-Maine, is the first of several that likely will be proposed once Hathaway's review is out. Harris said CDT agrees with a provision in the Rockefeller-Snowe bill that would create a cabinet-level cybersecurity adviser reporting directly to President Obama, but questions some of the extraordinary federal enforcement powers that could be created. CDT says it doesn't want citizens' civil liberties trampled upon. CDT general counsel Greg Nojeim gave Hathaway high marks for keeping her review process relatively open, in contrast to the Bush administration's penchant for secrecy. "So far the White House review team gets high grades on transparency," Nojeim said. Hathaway has held closed briefings in the past several weeks with Congressional committees, industry groups and privacy organizations, said Nojeim. "But the real test will be whether their recommendations reflect a commitment to transparency in the execution of the program," said Nojeim.

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It's never been easier to get information on the run. Smart devices such as the G1 and Apple iPhone let you put the Internet in your pocket and go - down the block or across the country. But this convenience could cost plenty in lost privacy, consumer advocates and tech analysts say. Once data have been collected and warehoused, you lose control of it forever. "The Big Brother aspect of it is troubling," says Rep. Edward Markey, D-Mass., former chairman of the powerful House Subcommittee on Telecommunications and the Internet. Mobile consumers are especially vulnerable, Markey says. Unlike PCs, cellphones tend to be used by one person exclusively. The information they telegraph - on Web browsing, lifestyle and more - tends to be "highly personalized." That's the main reason mobile data are so prized: The information is incredibly accurate. It's also why Markey and other privacy advocates say the debate about online privacy will become even more intense as advertising migrates to the mobile Web. Mobile advertising is still relatively new - G1 users, for now, get ads only through search results, for instance - but it's clearly a hot spot. The market is expected to reach $2.2 billion by 2012, from about $800 million now, according to JupiterResearch. Ultimately, it could surpass the traditional Web, now a $20 billion ad market. Yahoo, Microsoft and other ad-supported search engines collect information as Google does. But the sheer size and scope of Google's data-mining operation - the Web giant performs more than 80% of all desktop searches worldwide - makes it a uniquely pervasive presence, says Chester. Google and Yahoo, the two biggest players in search advertising, say their self-imposed privacy policies are sufficient to protect consumers, noting that they do not collect or store information in a way that can be directly tracked to an individual. Peter Fleischer, global privacy counsel for Google, says Google tries to make privacy language as

An Italian judge on Wednesday gave the go-ahead to a case in which Google (GOOG) could be held responsible for content it hosts but does not produce. The case centers on a 2006 video of four Italian youths taunting a child with Down syndrome. In the video, one of the youths incorrectly claims to be part of a small Down syndrome advocacy group called Vivi Down. The video was uploaded to the Google Video site, where it stayed for two months. Prosecutors have filed charges against five Google executives, saying they were in violation of Italian privacy laws and of contributing to the defamation of Vivi Down. At the heart of the case are two main questions: Should sites such as Google Video be held responsible for the content they host? And should such non-brick-and-mortar New Economy companies be subject to the laws in countries where they are not based? "The outcome of this will be to determine how big companies like Google should be expected to act," said Raffaele Zallone, a former chief counsel for IBM's Italian offices and the attorney representing a woman seeking damages in a secondary case tacked onto the main charges. FIND MORE STORIES IN: Italy | Google Inc | International Bus. Machines | Milan | New Economy Zallone, along with Milan prosecutors, the city's ombudsman and an attorney for Vivi Down, the advocacy group, say Google should have become aware of the offending video sooner and removed it sooner. Guglielmo Pisapia, Google's lead attorney in the case, denies any wrongdoing and says Google could not have acted differently. "Google did not produce the video, and when they received an official complaint, they removed it within five hours," said Pisapia, a former member of the Italian parliament. "If the argument is that they should have evaluated the video before it was posted, then that is a dangerous precedent." Oliviero Rossi, an author and commentator on technology issues, says unusual cases that push the limits of the law as this one does are

Update on Feb. 18, 8:33 a.m.: Facebook is backing off changes to its terms of service, informing users on their official blog that they will remain intact. "Over the past couple of days, we received a lot of questions and comments about the changes and what they mean for people and their information," Facebook CEO Mark Zuckerberg writes in the blog. "Based on this feedback, we have decided to return to our previous terms of use while we resolve the issues that people have raised." To learn more, read our original post below. Facebook is having trouble dousing the flames in a firestorm over its trustworthiness. A recent change in its terms of use -- the legalese tacked onto the bottom of most websites -- has sparked concerns that the social networking giant plans to own all users' information forever. Founder and CEO Mark Zuckerberg claimed in a blog post Monday that "on Facebook people own and control their information." But privacy advocates still aren't satisfied. "I think in simple terms it's a tug of war over user data," says Marc Rotenberg, executive director of the Electronic Privacy Information Center (EPIC) in Washington. "People put information on a Facebook page to share with friends. But it's pretty much with the understanding that they're deciding what to post and who has access to it. Facebook, like any other company, is trying to obtain maximum commercial value from its users."

The departments of Defense, State, and Health and Human Services have not met legal requirements meant to protect Americans' civil liberties, and a board that's supposed to enforce the mandates has been dormant since 2007, according to federal records. All three departments have failed to comply with a 2007 law directing them to appoint civil liberties protection officers and report regularly to Congress on the safeguards they use to make sure their programs don't undermine the public's rights and privacy, a USA TODAY review of congressional filings shows. An independent Privacy and Civil Liberties Oversight Board set up to monitor the departments hasn't met publicly since 2006; it no longer has members. Government missteps such as putting innocent people on terrorist watch lists and misusing administrative warrants, known as national security letters, "might have been dealt with much sooner if we had … cops on the beat to make sure there are standards that are being upheld," says Caroline Fredrickson, legislative director at the American Civil Liberties Union (ACLU). The lack of civil liberties officers at State and Health and Human Services is troubling because the departments hold passport and medical records, says James Dempsey, vice president of the Center for Democracy and Technology. "Security of that information is very important," he says, and these officers should monitor how it's used and shared. The Pentagon also has sparked concerns. Its Counterintelligence Field Activity office was criticized by the ACLU for wrongly tracking anti-war groups - a charge confirmed by the Pentagon in 2006. A 2007 law requires eight departments and agencies to have civil liberties officers and file reports. Justice, Homeland Security, Treasury, the CIA and the Office of the Director of National Intelligence have done so. Sens. Joe Lieberman, I-Conn., and Susan Collins, R-Maine, leaders of the Homeland Security committee, says departments not in compliance will b

Don't expect a letter from Monster or Heartland Payment Systems letting you know they've lost your data. The breaches at Monster.com and Heartland Payment Systems are raising questions about the efficacy of data-loss disclosure laws enacted in at least 45 states. Back in 2007 we wrote about how the financial services industry lobbied hard to block proposed federal rules requiring organizations to notify individuals whose data they lose, and to permit consumers to freeze their credit histories. States such as California and Massachusetts have passed laws giving consumers these rights. But the Monster and Heartland capers have brought weaknesses in the legislation to center stage. I asked Lisa Sotto, head of privacy and information management at law firm Hunton & Williams, about this: Q: Heartland and Monster told me they intend to comply with all state laws. That said, they have not announced plans to notify individual victims. Is that OK? A: In the state breach notification laws, it is permissible to delay notification if a law enforcement agency determines that notification would impede a criminal investigation. If such a delay is requested by law enforcement, notification must be made after the law enforcement agency determines that notice would not compromise the investigation. I do not know if these companies received a delay request from a law enforcement agency. Q: Monster says it chose not to email individual victims because the bad guys could then replicate that message and use it as a phishing template. That makes sense. But is that allowed by state consumer protection laws? A: There are now 45-plus state laws and they are not uniform. Typically, notice is provided via first class mail, but there are provisions in the state laws allowing for electronic notice as well. Q: The only official notices from Heartland and Monster so far has been one-page disclosures posted on a web site. Does that cover them? A: There are provisions in the state laws al

Legal woes may be next for Heartland Payment Systems, a payment processor that reported a major security breach this week. Depending on the results of the ongoing investigation, Heartland is likely to face the threat of litigation from issuing banks, merchants and consumers, says Scott Vernick, an attorney with Fox Rothschild LLP in Philadelphia, who specializes in data theft cases. "The businesses that use Heartland as a credit card processor, as well as thousands of consumers, will be anxiously watching for any negative impact, including harm to their business reputations, and the real possibility of identity theft or fraud," says Vernick. The fact that Heartland's systems were certified as being fully in compliance with data handling rules, called the PCI standards, raises questions about the efficacy of such standards. Hannaford Brothers grocery chain was likewise fully PCI compliant when it had 300 stores hacked and 4.3 million record swiped..... "This latest incident shows how, despite companies being compliant with regulations such as PCI, they are still a long way from being secure," says Mike Rothman, senior vice president of strategy at elQnetworks.