"They know how fast you read because you have to click to turn the page," says Cindy Cohn, legal director at the nonprofit Electronic Frontier Foundation. "It knows if you skip to the end to read how it turns out."

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Cohn says this kind of page-view tracking may seem innocuous, but if the company keeps the data long-term, the information could be subpoenaed to check someone's alibi, or as evidence in a lawsuit.

And it's not just what pages you read; it may also monitor where you read them. Kindles, iPads and other e-readers have geo-location abilities; using GPS or data from Wi-Fi and cell phone towers, it wouldn't be difficult for the devices to track their own locations in the physical world.

DRM is used by Apple to restrict users' freedom in a variety of ways, including blocking installation of software that comes from anywhere except the official Application Store, and regulating every use of movies downloaded from iTunes. Apple furthermore claims that circumventing these restrictions is a criminal offense, even for purposes that are permitted by copyright law.

Apple (AAPL) is in talks with Microsoft (MSFT) to replace Google (GOOG) as the default search engine on its iPhone, according to two people familiar with the matter. The talks have been under way for weeks, say the people, who asked not to be named because the details have not been made public.

Independent warranty provider SquareTrade has released a study of more than 30,000 notebooks tracked through its extended warranty plans—and the results are a little surprising. Computer makers Asus and Toshiba led the pack in terms of notebook system reliability, with fewer than 10 percent of their systems needing repair after two years, with three-year failure rate projections of about 15.6 and 15.7 percent (respectively). And who’s in last place? Top computer maker Hewlett-Packard, with more than 15 percent of its systems failing after two years, and a three-year projection forecasting over a quarter of them will fail in three years.

But the experience taught Kaplan and Braunstein a lesson: Customers would sacrifice lots of quality for a cheap, convenient device. To keep the price down, Pure Digital had made significant trade-offs. It used inexpensive lenses and other components and limited the number of image-processing chips. The pictures were OK but not great. Yet Pure Digital sold 3 million cameras anyway.