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Have you taken a look at what those closed-source apps do? They gather and sell your data, even data they have no reason to access, and to all buyers they can get their hands on.
And the only protection? Rooted phone, iptables.
Yep. There are a lot of dodgy apps in Android Market asking all sorts of permissions, and for a user it's not always clear if the app really needs them. There's a real trust problem here. That's a major downside of Android which is non-existent with your standard Linux distro and the repository scheme with its collection of open source apps.
Sad to say that Android is becoming the Microsoft Windows of mobile operating systems: A heaven for malware writers. And Google doesn't even seem to care