In the wake of the press stories about government surveillance, many, including me, have pointed to tools such as Tor to protect anonymity.
But I wanted to add a note of caution for those seeking a truly private way to access the Internet without anyone being able to monitor your browsing and trace it back to you.
Tor has several important limitations. You should be aware of them before you rely too heavily upon it.
If you are unfamiliar with Tor you can find a good explanation of how it works here. Basically when you use the Tor network your data is routed via several randomly selected relays until it exits and one of a few thousand exit nodes. From the point at which your data emerges onto the open Internet (from an exit node) it can be traced. Theoretically tracing back to you via the intervening relays should be impossible. But, implementation can affect what is theoretically secure.
SOURCE: profwoodward.org
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