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I see there is a link to a security policy at the bottom of the main page which explains in great detail how information is used. Is that for this site, or for some of the advertisements at the bottom of the page?
You mean the Privacy Policy? That's for AO and some of the advertising on the site. As long as you have it written somewhere that you are collecting information and how you intend to use it (to indicate the level of expected privacy then you are covered).
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What information are you collecting and how are you collecting it?
Every computer connected to the Internet is given a domain name and a set of numbers, that serve as that computer's "Internet Protocol" IP address. When a visitor requests a page from any Web site within the JUPM Network, our Web servers automatically recognize that visitor's domain name and IP address. The domain name and IP address reveal nothing personal about you other than the IP address from which you have accessed our site. We use this information to examine our traffic in aggregate, and to investigate misuse of the JUPM Network, its users, or to cooperate with law enforcement. See also Will you disclose the information you collect to outside third parties? We do not collect and evaluate this information for specific individuals. Our Web servers do not automatically record e-mail addresses of the visitors.
As you can see, JUPM does collect information about users via logging. In effect, the Privacy Policy found at most Websites is the CYA policy. I believe that should answer your initial question as to why webmasters at large websites aren't prosecuted for keeping logs. While most people don't read the Privacy Policy at websites (and really you should to see what information is open, what is being monitored regularly and what they do with your information), it is the Privacy Policies that usually indicate how information (logging and data mining) is being ued and what level of privacy expectation someone should have for a particular site.