"Oh my GAWD! You mean Google is selling information about me?!?" Yes, you bonehead. Google, Facebook, Twitter, Yahoo, AOL, etc, all collect information about you, and sell it to advertisers. This is why Facebook and all of the Google services are free. The funny thing is.... YOU handed them a giant chunk of your information right off the bat. When you signed up to have an account on Facebook, it seemed pretty simple. All you had to do was create a username and password. Then you filled in your profile. Now, Zuckerberg and friends know your name, gender, address, phone number, email address, employer, political views, religious views, as well as all of your friends and family, all of their information, and advertisers will pay out the nose for that kind of data so they can cater the ads to you and your interests. And then you go and provide the same information (maybe not as detailed) to other sites you are a member of and another advertiser will buy your info again. See how it works now?
"But how are they collecting info from my smartphone??" Because you told them they could, bonehead! When you downloaded an app from a certain app store, you had to agree to the app permissions before it would install. You didn't read them, did you? I didn't think so. You just agreed to let that harmless wallpaper app read your text messages, email messages, as well as your internet browsing history. So make it a habit to read and understand what the app has access to on your phone.
"If you're not paying for something, you're not the customer; you're the product being sold" -Metafilter user blue_beetle
Privacy is a myth. Anything you do on the internet, someone, somewhere is collecting information. Anything you do on your smartphone, someone, somewhere is collecting information. Now that I have you sufficiently paranoid, let's see what we can do to fix some of this.
The first, and most important thing you should do? Use some common sense. Seriously. Do you not want people knowing your home address? Then it's a pretty smart idea to not have it posted on a social network. Same thing with your phone number, or anything else you would prefer not to have in the public domain. So don't voluntarily post it there yourself.
Second thing you can do, is disable cookies in your internet browser. All the major browsers have cookies turned on by default so they can gather data from your browsing habits. Turning them off is very simple to do in all browsers. Click here to see how to enable the Do Not Track feature in Firefox. The official Keep My Opt-Outs from Google for their Chrome browser can be found right here. Even Microsoft's Internet Explorer has a do not track feature (assuming you're using the most current version of IE. If you are still using Internet Explorer 6, I will track you down by your cookies and slap you repeatedly until you upgrade to at least IE8).
The third way to protect your privacy in today's world would be to delete your profile in every account you have, sell your computer and smartphone and any other internet connected device, and find a nice plot of land out in Montana somewhere and live in a tent.
With internet privacy becoming a bigger and bigger issue, some sites are implementing a way for you to keep track of your information that is being collected. Google has had the Google Dashboard for a few years now, and if you have a Google account, all the information they have on you is stored on your Dashboard. It might be a good idea to take a look and see what is is there from time to time. I know I do.
Another thing I will do on a fairly regular basis, is check out what apps I have given permission to use with Facebook. On Facebook, in the upper right corner, click on the down arrow next to Home, and click Account Settings. Then, on the left side of the page, click Apps. This is a list of all the apps that you have given your permission to access and use your Facebook account. Most, if not all of these apps will get your personal information when you agree to the permissions for their use. *GASP!* Hey, you said they could! If you are worried about it, or just don't use that particular service any longer, simply click the X on the far right to remove that app.
Yes, I believe that privacy is a myth, but there are some steps you can take to protect some of your information. With everything revolving around the internet, unless you are considering the tent in Montana, protecting all of your information is impossible. So just be smart with what you do, and where you go.