Carrier IQ is a software program installed on smartphones like the Android by several cell phone companies, including AT&T, Sprint, and Samsung.
Carrier IQ logs your keystrokes, records telephone calls, keeps transcripts of SMS messages and tracks your location. It does this all without the user knowing and does not respond to force quit commands. It also transmits some of the info to the phone company in plain text without encrypting it.
After security researcher Trevor Eckhart discovered the app, Engadget and other tech media publicized it. Congress responded by requesting more information, because of privacy concerns and is now considering calling for an official investigation into whether Carrier IQ violates privacy laws.
The good news is that your iPhone does not have Carrier IQ installed, and when you turn off information sharing Apple respects that setting, unlike Android and Blackberry devices that have CarrierIQ installed.