I added Site Meter to my web page just three or four days ago. I found the the service very good and useful and gives variety of kind of information about your visitors. I got a bit interested and decided to do more research on Site Meter. The first few hits and I got something fishy. The Sitemeter copies some tracking and advertising cookies on the user's machine. Before beginning the discussion let's get a wrap-up of what are cookies.
Cookies are the information that a website stores on the visitors machine. Its just a string of characters that identifies you to the website. They are used to authenticate a user, session tracking(i.e. transaction time, cookie valitidity etc.) and remembering preferences of the users such as the theme you used on your social networking site etc. Cookies are pretty harmless by which I mean they aren't spywares (keyloggers etc.). Also a site can't read a cookie stored by another site. There are some tracking cookies which are used to track the habits of visitor.
Here's a normal function of cookies:
1) Visitor's browser requests a web page to the server
2) Server sends the requested page alongwith a cookie.
3) Browser sends a request for another page alongwith the cookie
However, third party cookies do have privacy concerns. Advertisements on websites are generally third-party advertisers. Means same advertisements on 2 different sites are provided by same advertiser. Which means they can track you when you navigate from one site to another.
The Site Meter stores such a tracking cookie called specificclick.net on the visitors machines. Site Meter is basically used to track the visitors to your site. But what's happening is the above cookie is used to track you and your visitors and this data is provided to the advertising company so that they can provide relevant advertisements (ofcourse Site Meter gets paid for this) . The advertising company can track every single of your clicks, websites visited overtly or covertly, your surfing habits. Does Site Meter include this in the Terms of Agreement? You can read more here. Infact, this story is about a year and half old and the cookie is still being used. I've switched to Statcounter (didn't find any such cookie in Statcounter). Google Analytics is another option.
The truth is, many companies including likes of Google, Microsoft store data about their visitors to improve their services. There are huge databases which store user's surfing habits. Data mining is done on this information, which is used to analyze customer behavior and draw marketing strategies.