Surfing at public Wi-Fi hotspots can be dangerous: laptops and Wi-Fi-enabled smartphones pass lots of secrets through the air unless you've taken specific measures to use encrypted connections to protect passwords and personal data. AnchorFree would like to encourage you to protect your data by offering you the best possible incentive: a free service.
I've long recommended that hotspot users employ a virtual private network (VPN) connection, which creates an encrypted tunnel from a computer or handheld to a server elsewhere on the Internet. All data entering and leaving the machine is safely wrapped up from prying eyes on the local hotspot network. Corporations make their remote employees use VPNs to ensure that sensitive information is accessible only on the employee's laptop or within the corporation's network, never while in transit between the two.
But individuals have also been able to get VPN protection via rent-a-VPN services like WiTopia's personalVPN. I wrote about that firm and others, along with general security advice, in "Secure Your iPhone Connections at Macworld Expo - and Beyond," 2008-01-09; that advice remains valid!
AnchorFree extended an existing free VPN service for laptops - Hotspot Shield - with an offering that works with the iPhone. The laptop version of Hotspot Shield is based on OpenVPN, which uses the SSL/TLS protocol to create a secure session. But Hotspot Shield has two problems for the iPhone. First, it requires that you download and install Mac OS X or Windows software to create a connection; the iPhone doesn't yet allow VPN software to be installed. Second, the iPhone also doesn't yet natively support SSL/TLS VPNs, despite their popularity.
To work around these problems, AnchorFree chose to add to Hotspot Shield a VPN type that the iPhone has built in: L2TP, which stands for Layer 2 Tunneling Protocol over IPsec (Internet Protocol security). L2TP is an extremely strong method of creating a secure connection, and is one of three methods that the iPhone 2.0 Software and later support. (Alas, the iPhone can't maintain a seamless VPN connection when you roam among Wi-Fi networks or between Wi-Fi and cell data networks; you have to disable and then re-enable the VPN connection for each network move.)
To use Hotspot Shield with an iPhone - or an iPod touch with 2.0 or later software, which has the same included VPN support - sign up at the AnchorFree iPhone entry page for a free account, and then follow the directions the company provides for how and what to enter in the iPhone's VPN connection setup area. No additional software for the iPhone is needed.
The service is offered at no cost, by the way, because AnchorFree uses it as a branding tool. The firm has a federated network of independently operated free Wi-Fi hotspots for which it pushes out ads and shares revenue, as well as offering advertising in its desktop VPN software. There's no advertising - nor any possible - with the iPhone VPN account.
As with any VPN service (whether free or fee), it's critical to remember that the termination of the VPN tunnel is at the VPN operator's network operation center (NOC). That means your data is entirely protected in an extremely secure manner from your laptop to their servers - after that, it could theoretically once again be sniffed en route to its eventual destination.
That said, there's not much to worry about. VPN providers like AnchorFree generally have additional protections in their NOCs, which may be located in their offices or in co-location facilities (like TidBITS's network provider, digital.forest). Traffic from a NOC to a destination, like an email provider or Web site, is usually nearly impossible to intercept (unless you're a government) because of the security of the routers that carry traffic between network hubs. You can't just plug in and gain access, even if you could get into the sealed rooms in which the routers and servers are located.
In any case, using a VPN protects the weakest link when you're working in public: the air around you that vibrates with your sensitive information.