Taken from the Google Blog:
This week we’re expanding our traffic layer to cover all U.S. highways and arterials when data is available. We’re able to do this thanks in no small part to the data contributed by our users.
Google Maps will now show you live traffic conditions on arterial roads in selected cities. Just zoom-in on the city you’re interested in, and click the “Traffic” button in the upper-right corner of the map. As you zoom in closer to an area of interest, we’ll color the arterial roads, in addition to the highways, to show current traffic conditions. Just as with the highways, the colors correspond to the speed of traffic (relative to the speed limit of the road): green is free sailing, yellow is medium congestion, red is heavy congestion, and red/black is stop-and-go traffic.
If you use Google Maps for mobile with GPS enabled on your phone …. your phone sends anonymous bits of data back to Google describing how fast you’re moving. When we combine your speed with the speed of other phones on the road, across thousands of phones moving around a city at any given time, we can get a pretty good picture of live traffic conditions. We continuously combine this data and send it back to you for free in the Google Maps traffic layers. It takes almost zero effort on your part — just turn on Google Maps for mobile before starting your car — and the more people that participate, the better the resulting traffic reports get for everybody.
(Includes a note on privacy:)
We understand that many people would be concerned about telling the world how fast their car was moving if they also had to tell the world where they were going, so we built privacy protections in from the start. We only use anonymous speed and location information to calculate traffic conditions, and only do so when you have chosen to enable location services on your phone. We use our scale to provide further privacy protection: When a lot of people are reporting data from the same area, we combine their data together to make it hard to tell one phone from another. Even though the vehicle carrying a phone is anonymous, we don’t want anybody to be able to find out where that anonymous vehicle came from or where it went — so we find the start and end points of every trip and permanently delete that data so that even Google ceases to have access to it. We take the privacy concerns related to user location data seriously, and have worked hard to protect the privacy of users who share this data — but we still understand that not everybody will want to participate.
Source: Google Blog.