Every machine connected to the Internet has a unique Internet Protocol (IP) address, including your computer. You may have a static IP address or it may change each time you go online. Either way, you are tagged with a unique identifier every time you surf the Web.
An IP address is necessary for the Internet to work. It is literally the address of your personal computer on a vast computer network -- like a single house on a crowded street. The only way a Web server can send the contents of a Web page to your browser is if it has your computer's address on the network.
IP addresses, in and of themselves, do not contain any personally identifiable information about you. However, if you're signed up with an Internet Service Provider (ISP) -- which is the way most of us get our Internet service -- then your ISP can easily link your IP address with your name, home address, phone number, e-mail address and even credit card information.
Don't get paranoid just yet: In general, ISPs have fairly strict privacy policies. They won't give out your personal information to any random person who asks for it. However, under laws like the U.S. Patriot Act and through subpoenas from the police and federal agencies, an ISP may have no choice but to supply personal information related to an IP address.
Cookies are another way for an outside source to track your Web surfing habits. Cookies are tiny text files that are saved in your Web browser when you visit a Web site. The file might contain your login information, your user preferences, the contents of your online shopping cart and other identifiers. These cookies make your Web browsing experience more personalized and customizable. They're designed to save you time when you visit your favorite sites. They're also designed to help advertisers tailor their messages to your personal preferences.
First-party cookies are cookies left on your browser from Web sites you visited. Third-party cookies are files stored on your computer from advertisers and other parties that have information-sharing agreements with the site you visited. Many people find third-party cookies to be a particularly egregious breach of privacy, since you have no control over who collects information about you.
In the next section, we'll taker a close look at how scam artists can use an online data trail to piece together your identity.