Tor is a slick idea. It was started by the US Naval Research Laboratory, and is now run by the Electronic Frontier Foundation. Here's a good primer on how it works. Essentially, your computer's internet communications run through a collection of distributed servers that anonymize your location. Here's a diagram:
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Tor does not modify the content, so visitors tracked by cookies will still be correctly identified by web analytics packages. However, geography and DNS based reporting will be inaccurate. I can see web analytics vendors needing to think about how to filter out this traffic from geo-based reporting (given that the Tor environment grows and other tools like those being developed at kaos.theory take off...)
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