Tor: Overview
Traffic analysis
Traffic analysis can be used to infer who is talking to whom over a public network. For example, Internet packets have a header used for routing, and a payload that carries the data. The header, which must be visible to the network (and to observers of the network), reveals the source and destination of the packet. Even if the header were obscured in some way, the packet could still be tracked as it moves through the network. Encrypting the payload is similarly ineffective, because the routing information is all an observer needs.
Knowing the source and destination of your Internet traffic allows somebody to track your behavior and interests, impacting your checkbook or even threatening your job or physical safety.
Individuals, corporations, and governments all have an interest in traffic analysis protection. Individuals want to protect themselves and their family members from remote websites, or connect to resources such as news sites or instant messaging services that are blocked locally. User groups such as the German "Diabetes People" organization recommend Tor for their members' online privacy and security. Activist groups such as the Electronic Frontier Foundation are publicizing Tor as a mechanism for maintaining civil liberties online. Corporations such as Google and Wal-Mart are investigating Tor as a safe avenue for competitive analysis or to try out new experimental projects without associating their name with the project. A branch of the U.S. Navy uses Tor for open source intelligence gathering, and one of their teams used Tor while deployed in the Middle East recently.
Network structure
Tor helps to reduce the traffic analysis risk by distributing your transactions over several places on the Internet, so no single point can link you to your destination. To make private connections in Tor, a client incrementally builds a path or circuit of encrypted connections through servers on the network, extending it one step at a time so that each server in the circuit only learns which server extended to it and which server it has been asked to extend to. The client negotiates a separate set of encryption keys for each step along the circuit.
[Insert snazzy onion diagram here.]
Once a circuit has been established, the client software waits for applications to request TCP connections, and directs these application streams along the circuit. Many streams can be multiplexed along a single circuit, so applications don't need to wait for keys to be negotiated every time they open a connection. Because each server sees no more than one end of the connection, a local eavesdropper or a compromised server cannot use traffic analysis to link the connection's source and destination. The Tor client software rotates circuits periodically to prevent long-term linkability between different actions by a single user.
Tor also makes it possible for the clients to be hidden. Using Tor "rendezvous points," other Tor clients can connect to these hidden services, each without knowing the other's network identity. These hidden websites let users publish material without worrying about censorship.
Privacy
Of course, Tor can't solve all privacy problems itself. Tor focuses on protecting the transport. You need to use other protocol-specific software, such as Privoxy for web browsing, to clean identifying information like browser type and characteristics, and you need to use other common sense: don't provide your name or other revealing information in web forms. Also, like all anonymizing networks that are fast enough for web browsing, Tor does not provide protection against end-to-end timing attacks: if your attacker can watch the traffic coming out of your computer, and also the traffic arriving at your chosen destination, he can use simple statistics to discover that they are part of the same circuit.
Anonymity is threatened as never before by trends in law, policy, and technology that are undermining our ability to speak and read freely online without revealing who we are. Rather than trusting to laws to maintain our rights, Tor aims to give people the power to make their own decisions about their privacy. Providing a usable anonymizing network on the Internet today is an ongoing challenge, both in terms of making usable software that meets users' needs, and also in terms of keeping the network up and able to handle all the users; but we're making progress at finding a good balance to provide both usability and security. Please do what you can to help out.