Basically I think they mean that when you visit a site, other sites are alerted to your web surfing habits. I know that some of them are basically market research sites.
One example of how you know someone is watching is through ads customized to your interests. For instance, I’m a Santorum supporter so I get Santorum ads everywhere. I visit lots of photography and photoshop sites so I get ads for camera and photo editing software all the time.
I visited sites for my sister and niece and my brother-in-laws dad and I see ads all over the blogs and stuff for those things I searched for!