Microsoft have released a must read, downloadable document Privacy Guidelines for Developing Software Products and Services based on their internal privacy guidelines.
Before collecting and transferring personal information, you, as the entity
requesting the information, must have a compelling business and customer value
proposition. A value proposition that benefits customers may create a
natural incentive for them to entrust you with their personal information.
Only collect personal information if you can clearly explain the net benefit to
the customer. If you are hesitant to tell customers “up front” what you
plan to do with their information, then do not collect their data. This
applies to data collected and stored locally on the customer’s machine or
transferred over the Internet.