Why in the world would Google's Street View cars be scanning for MAC addresses? According to the German Federal Data Protection Commissioner, Street View cars are equipped with Wi-Fi scanners that are mapping the location of wireless networks. WTF?

The data-protection official is worried that Google is acquiring various pieces of information about WiFi networks, including their location, name and protection protocol. The worse part, Schaar says, is that all this data is linked to a physical MAC address that could then be used to link IP addresses to real locations and, by extension, to real people.

On the face of it, it looks pretty bad. Google is covertly acquiring massive amounts of data, which it could use in correlation with all of its other data-collection methods to create a very accurate and detailed profile of every Internet user out there.

But there are some very big caveats with the whole logic. For one, this isn't much of a secret. Google has said that it scans for WiFi networks and mobile-phone relays with Street View cars and this has been known for at least a couple of years.

Still, just because it acknowledges something, it doesn't necessarily make it right. However, the data it collects is all public, these wireless networks are discoverable by anyone with the intention of doing so. Google doesn't collect anything that is not already provided publicly. People shouldn't expect the information that they make public to not be collected.

And the practice of mapping out wireless networks so that they could be used to determine the location of a user is widespread, it is one of the most common ways of figuring out where a user is without access to GPS data. This is how a site or browser can pinpoint your location on a laptop or other devices that don't have dedicated location hardware.

Google has put up an interesting post explaining the importance of 'location' for the web and the means by which a user's location is determined, among which is using Wi-Fi networks. The post doesn't directly address the German official's position, but the timing is more than coincidental.

So it's no surprise that geolocation services are becoming more popular with people than ever before, and that many companies are adding locations functions to respond to this demand and improve the services they offer their users. For example, Twitter allows users to geotag their tweets. Everyday, millions of twitter.com users on a desktop computer or mobile phone choose to do this. Knowing that someone is posting from Bangkok as opposed to Manchester gives followers an important perspective when they read a tweet about ‘red shirts all over the city.' On smartphones like iPhone, Palm, and Android devices, services such as Google Maps for mobile, Yelp, and Urbanspoon use location to provide relevant local search results, while apps like Foursquare and Google Latitude let you find your friends on a Friday night.

But how does this work? How do smartphones actually know where you are? Lots of people talk about GPS (the satellite-based global positioning system) but a lesser known fact is that GPS can be slow: it can take tens of seconds and sometimes much longer to “fix” your location depending on the specific hardware and your physical location. Consequently, companies have worked out other solutions. These are generally based around the idea of “listening” for nearby cell towers or Wi-Fi hotspots and using this data to quickly approximate a rough position. In fact the very first iPhone didn't even have a GPS - it relied solely on this kind of triangulation for location information. By treating Wi-Fi access points or cell towers as “beacons,” smartphones are able to fix their general location quickly in a power-efficient way, even while they may be working on a more precise GPS-based location. This can be done without any intrusion into the privacy of a Wi-Fi network. We only use information that is publicly broadcast (for example, that list of Wi-Fi hotspots you see in the anytime you open the “join network” option on your PC). It doesn't involve accessing the network to send or receive data.

However, a database of known network locations is required for both cellular and Wi-Fi triangulation. Companies like Skyhook Wireless compile such databases which are used by many in the industry. Intel has promoted the use of Wi-Fi for “location aware computing” through projects such as its Location Technologies SDK. Google has contributed by creating its “My Location” API, which relies on a database of locations collected by Google Maps for mobile as well as by our Street View cars, which catalog the location of Wi-Fi access points (the public “beacon” part described above) at the same time as they are collecting Street View imagery and 3D laser scans of buildings. Google has also worked to help even notebooks and tablets find out their location in Chrome and Firefox through the W3C Geolocation API.