The Internet Advertising Bureau (IAB) has launched a code of practice for targeted online advertising services that track users' browsing habits in a bid to display personalised adverts.

Tech companies AOL, Google, Microsoft and Yahoo are among the firms backing the Good Practice Principles, along with controversial targeted advertising system Phorm. Phorm has already created a great deal of controversy in the UK, in particular when BT trialled the service on 30,000 web users without their knowledge.

By signing the self-regulatory code of practice, the tech firms have agreed to inform consumers they are collecting data regarding their online activities, as well as offering the ability for the web user to decline to take part. The guidelines also require companies to educate consumers about the use of their data and how to opt-out.

The move follows the announcement that BT is likely to roll-out Phorm to all of its customers, following a trial of 10,000 web users last year. However, BT has not said when this might happen.

Research by Forrester revealed that 26 percent of European online advertisers used behavioural-based systems during 2008.

"The IAB has gone to great lengths to ensure that the industry protects and educates consumers on their rights and choices," said Nick Stringer, head of regulatory affairs at the IAB.

"Behavioural advertising has clear benefits to consumers, delivering more relevant advertising and keeping most of the content and services we enjoy free of charge. However, it's in its infancy and we need to let consumers know they are in control," he said.

See also: EC urges govt to act on Phorm privacy concerns