The Wall Street Journal has interesting article about Microsoft’s internal dilemma about privacy settings in Internet Explorer. It’s basically a matter of privacy vs. advertising, both of which Microsoft has an interest in. WSJ’s Nick Winfield reports:

In the end, the product planners lost a key part of the debate. The winners: executives who argued that giving automatic privacy to consumers would make it tougher for Microsoft to profit from selling online ads. Microsoft built its browser so that users must deliberately turn on privacy settings every time they start up the software.

Microsoft’s original privacy plans for the new Explorer were "industry-leading" and technically superior to privacy features in earlier browsers, says Simon Davies, a privacy-rights advocate in the U.K. whom Microsoft consulted while forming its browser privacy plans. Most users of the final product aren’t even aware its privacy settings are available, he says. "That’s where the disappointment lies."

In response to privacy articles like the WSJ’s, Microsoft has written a post on the IE Blog. It says:

Because some of the technologies that can be used for tracking are also essential today for basic functionality, there is no “Just give me perfect privacy” feature. The way different tracking and anti-tracking technologies interact can read like a Spy vs. Spy comic strip. Distinguishing between a tracking technology (a beacon) and a useful piece of web content (a stock chart used as a beacon) is not obvious. Some people are concerned about Adobe Flash’s “super cookies”; IE8’s InPrivate browsing clears these as well with newer versions of Flash.  As another example, InPrivate Browsing in IE8 “clears your tracks” and removes information from browser history when you close IE. During the actual browsing session, before you close it, IE still records history (so the back button continues to work) and cookies (so that logins and shopping carts continue to work). Ultimately, people want the web to work and privacy protection.

We designed InPrivate Filtering to help users control who can get information about their browsing. IE enables users to choose how privately they want to browse. Users are in control of several privacy protection features in IE, and how automatically they function. Specifically, users can keep browsing information from going to sites they don’t actually visit directly. IE determines the potential tracking sites on the list based on the sites you browse to directly and how those sites were written. Different sites on the web have articles about more advanced features, like always browsing with InPrivate Filtering on, and importing and exporting InPrivate Filtering lists.

NetMarketShare just released new research indicating that IE has extended its share of the browser market by 1% since May.

Microsoft provides steps to adjust your privacy settings in IE here.