The story broke last week that millions of smart phones were tracking and reporting on keystrokes that users are entering into their smart phones. This included the text of text messages, what websites users visited, even what searches were submitted to search engines.

Trevor Eckhart, a 25-year-old researcher from Connecticut, allegedly discovered that a deeply embedded program called Carrier IQ has been placed on most current Android phones. According to Eckhart, the program tracks keystrokes and location and sends that information to the phone’s carrier without the phone owner’s permission.

Eckhart has posted a video which pretty clearly demonstrates the Carrier IQ program tracking keystrokes, though Mountain View, CA, based Carrier IQ says it doesn’t do that. However, the big source of contention is what happens after that. Is all this information, every key you pushed, what you said, did, and where, all sent to the carrier?

No, according to Carrier IQ. The company released a statement saying “our software does not record, store or transmit the contents of SMS messages, email, photographs, audio or video.” They went on to say that they do know if a text is sent accurately, but they do not know the information it contains. They do track things like what programs are draining a battery (to bad Apple doesn’t seem to be able to do this), but do not capture a shot of the screen. They claim their program just helps carriers analyze problems and provide better service. According to Carrier IQ, each carrier decides what data they want sent to them.

This issue is far from over. Researchers will be looking at this program for quite some time, we expect. There’s talk of the potential of federal wiretap laws being broken, and Senator Al Franken has sent Carrier IQ an open letter asking specific questions about the program  and requesting a response by December 14.

We’ll have more on this story here at CP as information comes in.