TaintDroid is an amazing tool to check out what your installed apps are sending and to where.Right now TaintDroid is not for everyone. It is in it developmental stage. However for application developers and rooted users of a Nexus S or a Nexus One this tool can be easily used. This tool can be easily incorporated to Android Development Kit. You can easily and safely test any application in a virtualized 2.3 Android operating system.
Two colleges, Penn State and Duke University both work together to target the most popular 30 apps on the market place for testing. Of the 30 apps 15 of them leaked GPS information to remote advertisement servers. The way it work is after installing TaintDroid, you run a program and then if the program sends anything over the network TaintDroid displays a notification in your notification area.
The best way to check this out is to go to their website and watch the demo video. It will give you a good example of how TanitDroid is used and a good understanding of the functionality. TaintDroid is open source and has no support other than their website and forum board.