The Open Rights Group has raised concerns over potential privacy violations caused by the Phorm advertising system.

The monitoring system analyses users' surfing habits and is proving increasingly popular with ISPs looking to more accurately target subscribers with advertising.

Talk Talk, Virgin and BT are all currently working with Phorm on a pilot basis.

However, the Open Rights Group is calling for a detailed explanation of the exact workings of Phorm to ensure that it complies with privacy legislation.

"Until we know exactly how Phorm works, and across whose networks our data will flow, speculation about the privacy implications will continue," said the organisation in a statement.

"Can ISPs' employment of Phorm comply with the Data Protection Act? Is intercepting traffic in this manner an offence under Section 1 of the Regulation of Investigatory Powers [RIP] Act?"

Nearly 4,000 people have signed up to a Downing Street petition highlighting their worries.

Privacy advocates have suggested that Phorm may be in contravention of the RIP Act, which states that the interception of any transmission across a public telecoms network requires the explicit consent of users.

The Information Commissioner's Office (ICO) has also said that Phorm will be investigated.

"Phorm has provided written information to us about the way in which the company intends to meet privacy standards," said an ICO spokesperson.

"We are currently reviewing this information. We are also in contact with the ISPs which are working with Phorm and we are discussing this issue with them."

In response to the furore Phorm issued a statement denying any lack of compliance with privacy legislation.

"Our technology complies with the Data Protection Act, RIP Act and other applicable UK laws. Consumers are in control. They can switch the service off or on," the company said.

"Meanwhile the system does not know who they are or where they have browsed as it does not gather personally identifiable information, does not store IP addresses or retain browsing histories.

"We are currently in conversation with the Open Rights Group to meet with them and look forward to explaining how our technology sets a new standard in online privacy."