It sounds like a rubbish film plot: millions of smartphone owners are being tracked by their phones. Their mobile apps are eavesdropping on them, too. And information about their whereabouts is being sold to third parties.

But it isn't science fiction. If you own a smartphone and download popular apps, the odds are good that your smartphone knows more about your day-to-day travels than your spouse does. Apple, Google and Microsoft are in the hotseat now, having to explain how iPhone, Android and Windows Phone 7 handsets really work, and what they know about where you go and what you do. Predictably, the lawsuits are flying.

Two US women are suing Google over the location-tracking technology included in the company's Android mobile operating system. While, also in the US, two men are suing Apple and demanding that the company either stop collecting tracking information or better safeguard the data it does collect. Both Google and Apple also face an inquiry by a US Senate committee on May 10 intended to discover to what extent they snoop on their customers via smartphones.

With so much alleged spying going on, it's hard to focus on the most important question: should you care?

Here's a breakdown of what smartphone manufacturers, Microsoft, and some app developers are doing with your phone's location data.

Poll: What do you think about location tracking?

Apple location tracking

A database stored in Apple's iPhone and 3G iPads kicked off the latest round of privacy concerns over mobile-device location tracking. The concerns started after a file called consolidated.db was discovered on iOS devices and in iOS backup files on PCs; the file appeared to be logging the iOS device's location based on the positions of cell towers and Wi-Fi access points. Apple later disputed that allegation, saying that it simply maintains a database of regional cell towers and Wi-Fi access points to improve its phones' location services.

Apple does take some location data from your iOS devices - and, under certain circumstances, from your Mac when it's running OS X Snow Leopard or using Safari 5. Apple says that about every 12 hours iOS devices send encrypted and anonymous cell-tower and Wi-Fi access-point location data back to Apple. The company then uses this information to update a master database of worldwide cell-tower and Wi-Fi access-point locations. This data later updates on your phone to help your device find its location faster, as opposed to depending solely on GPS satellite signals.

The company says that it will take this data from your iOS device only if you are using the device's location services. And according to Apple, a future update will ensure that consolidated.db does not log any cell-tower or Wi-Fi access-point information if you have location services turned off. For details, read more about Apple's location-data practices.

NEXT PAGE: Android smartphones

  1. Do you really need to worry?
  2. Android smartphones
  3. Your location for sale