As you can probably imagine, whenever you install an application in your phone, it has the ability to gather and transmit any data it "needs". This can include your GPS location and address books information (sometimes). Not only is this potentially a privacy concern, it can also quickly suck up your data transfer quota as well as your battery power.
Android users wanting to get control over what applications are allowed to communicate with the Internet should check out DroidWall:
DroidWall – [aka] Android Firewall is a front-end application for the powerful iptables Linux firewall. It allows you to restrict which applications are permitted to access your data networks (2G/3G and/or Wi-Fi).
Simply put, this application acts as a firewall where you can specify what applications can get to the internet. Using DroidWall, you can prevent your Tip Calculator or whatever application doesn’t really need Internet access from transmitting or receiving data.
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There needs to be a disclaimer that the Droid phone needs to be “rooted” in order for DroidWall to work.