For those of us that work in digital marketing, the fact that companies track our every move and use the information they collect to sell us stuff is well known. This has been happening for since before the Internet. It's the basis of direct marketing.
However, technology today lets us track an incredible amount of information by following a customer online. It's not just about demographics anymore. We can now understand people's behaviour, shopping habits, interests, hobbies, etc. And using analytical models we can profile them and even predict future behaviours.
Arguably, no company knows more about your than Google. Just log into your Google account (gmail, plus, docs, reader, etc.) and go to Google Dashboard. You'll probably be surprised. All that is connected to you personally. Even scarier, Google uses your web history (searches you've done, sites you've visited) and keywords in your emails to know pretty much everything about you.
The New York Times recently published an article titled How Companies Learn Your Secrets that explains how companies get and use this information, using Target as an example.
Target tracks people's behaviour online and their buying history to create a profile. They then use this information to send you offers for products you may not yet know you need. For example, they can predict when a woman is pregnant and send her coupons for products they know she'll need soon.
As I said, it's scary. People tend to freak out if they know this is happening though, so companies are getting good at doing it while looking like they're not. As a Target executive told the New York Times:
“... we found out that as long as a pregnant woman thinks she hasn’t been spied on, she’ll use the coupons. She just assumes that everyone else on her block got the same mailer for diapers and cribs. As long as we don’t spook her, it works.”
On a related story, Forbes describes how Target figured out a teen girl was pregnant before her father did, which is also worth a read.