A researcher demonstrates that a smartphone has an embedded piece of software that has the ability to track what its user is doing on the phone, things such as keystrokes and details of text messages received. There is no question that the software on at least some phones is sending all this data back to Carrier IQ, which is the company that produces this software. (See, for example, Gizmodo articles about Carrier IQ here and here.)
A host of companies, from Carrier IQ to carriers like AT&T to handset manufacturers like Apple, line up to deny any malicious intent. Some say they are not aware of how the software ended up in the phones, some say the software is resident but not activated, some say it used to be activated but not in current versions, some say the software is turned on but collects only "innocuous" data like call quality, some say the data is collected but no one's privacy is being violated (because the information is aggregated, etc. etc.)
These things are for sure: users are not made aware of such tracking; no one is being asked to opt in or opt out of such tracking; the application runs in the background but is not listed besides other running apps; if the user is smart enough to find the application, the button that should disable the app is immune to clicking.
It's the wild, wild west. If the industry does not exercise self-restraint, the path ahead will be rocky. Mom knew it best: there are things in life you can have but shouldn't.