Honesty is always the best policy, period. Take your mother's advice on this one and make sure that your customers know what you're doing. Companies need to clearly and conspicuously disclose their privacy policies. This is one area that is black and white. Show your Web visitors that knowledge and a better understanding of them can work in their favor.
Information helps businesses serve their customers better, faster and more efficiently.
If Web visitors understand the value of sharing information, they'll be much more likely to fill out your registration forms and answer your questions. There has to be something in it for the customer. Make sure they know what that something is. Separate business from the personal without sacrificing personalization. It does sound like an oxymoron, but think about it.