The discussion started on tor-talk about Iran cracking down on "web dissident technology." The question was raised about why the government would create and continue to fund a technology like Tor that could be used against them. Tor anonymizes the origin of your traffic, and it makes sure to encrypt everything inside the Tor network, but it does not magically encrypt all traffic throughout the internet." "Yes, the guy running the exit node can read the bytes that come in and out there. The TorFAQ clearly states that exit nodes can eavesdrop.
Surfing with Tor is supposed to anonymize traffic in the same way that Tor can keep your IP from showing up on a web log, it can keep a government or law enforcement IP address from showing up on web logs during online surveillance. People use Tor to be anonymous for all kinds of different reasons, from regular users, to journalists, dissidents, whistleblowers, corporations, overseas military field agents, and even law enforcement to list out a few. The Tor Project is free software that lets people be anonymous online but it's not an invisibility cloak that's meant to protect privacy. There is an interesting post on Cryptome, TOR Made for USG Open Source Spying Says Maker, in which one of Tor's creators, Michael Reed, says to look at why the government created Tor from a common sense point-of-view instead of as conspiracy theory.
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