The Internet is exploding into billions of little pieces. Rather than simply linking laptops and personal computers, the Web’s gossamer filaments are increasingly connecting to ever-smaller communications nodes: Remote sensors, equipped with tiny radio transmitters, are now being embedded into all sorts of things — packages, documents, machinery, farm animals, pets and, yes, humans.

Sensors “will change our world in this decade the way microprocessors did in the 1980s and the way the Internet did in the 1990s,” predicts a trade magazine called, naturally, Sensors. The phenomenon goes by various names (the Pentagon prefers “total information awareness”). My favorite is “pervasive computing,” because it best describes what we’re all in for when — not if — this new wave of connectivity completely washes over our lives.

And, just as with the Internet, we’re going to have to protect ourselves from the downsides as we enjoy the benefits of a Web that watches us all really, really closely.

Government and retailing are the sectors most eager to slap a remote sensor on just about anything that moves, or even vibrates. The departments of Defense and Homeland Security are busy putting wireless tracking chips on warehouse pallets, shipping containers and soldiers. And retailers are no longer content to just see what you buy using your discount “club card.” Now they want to follow the products home with you and have them report back on how you used them.

Most sensors fall into the category of “radio frequency identification” transmitters, or RFID. Hyped as the next big thing for several years now, RFID looks to be finally taking off because of falling costs and the new ubiquity of the wired and wireless Web.

The difference between an RFID device and, say, a bar code or your plastic card’s magnetic strip, is that it can store much more information and does not need to be physically “swiped” for its data to be retrieved. A receiver as far as 60 feet away can “wake up” an RFID chip and ask it for all types of data: its location, details of recent transactions, even changes in temperature or humidity.

This kind of “contactless” information scanning opens up a world of possibilities for inventory control, supply chain management and other fairly benign, and beneficial, uses. An RFID-driven project called the “Future Store Initiative,” by Germany’s Metro chain, Wal-Mart Stores Inc. and Tesco, promises highly personalized shopping experiences, where consumers’ refrigerators will beam a shopping list to the grocer. When they get to the store, screens on their carts will give them customized product offers as they head down the aisle.

The downside, of course, is that retailers will have a voyeuristic view of all your spending and consuming habits. Eventually, privacy experts warn, people will leave so many electronic bread crumbs that a retailer — or a controlling government authority — could monitor your every move by tapping into the right databases.

To privacy advocates, the most worrisome use of RFID to date is the new passports to be launched this summer by the State Department. The agency had to go back to the drawing board a year ago to address concerns that any government agent with a portable device could scan passports from yards away without the owners’ knowledge, not just at airports, but also around town — at houses of worship, say, or political demonstrations. Now the agency contends that the new passports can’t be scanned unless they’re less than four inches away (leading us to ask: why not just stick with old-fashioned bar codes?).

The best illustration of pervasive computing’s promises, and dangers, is when it becomes, literally, invasive. Implanted radio chips used to be the stuff of science fiction novels or Lafayette Park wackos. Now they allow GPS tracking of tycoons and children, and let people wave themselves into swank resorts or high-security facilities.

Such subcutaneous data wafers are even being hawked by Tommy Thompson, the former Health and Human Services secretary and a board member of VeriChip Corp., which makes RFID implants that carry medical records. A year ago Thompson, a former Wisconsin governor, told reporters that all Americans should consider getting them. He said he’d get chipped himself, but so far he hasn’t done so.

Thompson’s advocacy of RFID implants spurred his home state’s legislature into action. The Wisconsin state Assembly on March 9 passed a bill that would make it illegal for government or businesses to require anyone to have a microchip implanted under his skin. After railing against the privacy threats such chips pose, the measure’s Democratic sponsor won Republican support by backing an amendment to exempt judges who order the chips to track convicted sex offenders and parents who want to outfit their children with the devices, according to the Wisconsin State Journal.

Congress, to date, has not debated any legislation addressing the privacy concerns attendant with this new era of ultra-personal computing. For that matter, it hasn’t even acknowledged the issue.

When it does, it’s likely that lawmakers in Washington — like those in Wisconsin — will find themselves negotiating between the extreme fears and promises of the next generation of the Internet.

Mike Mills is CQ’s executive editor for electronic publishing.