As protection against malware, adware, and just plain arrogant software that thinks it owns your phone, Android requires apps to announce what they may access and change. For instance, an app must tell you if it might access your contacts or track your location. The app provides this information at installation, when a list of so-called permissions pops up before you make the final install-or-not-install decision.

But installing an Android app is an all-or-nothing choice. If you object to what an app wants to do, and you’re not willing to root your phone, your only other option is to not install the app.
Apps often ask for permissions that, on the face of it, they shouldn’t really need. For instance, I have a rhyming dictionary called B-Rhymes, that I couldn’t install without giving it permission to check my location. Why? To find rhymes for the cities I visit?
Yes, I know (or at least assume) the real reason: So it can target advertising to match my physical location.

To make matters worse, Apps can add permissions after you install them. You’ve probably noticed that some apps require a manual update. When you update an app manually, examine the screen carefully for a new Permissions section.
Want to check what you’ve allowed your existing apps to do? Depending on your version of Android, tap Menu>Settings>Applications>Manage applications or Menu>Settings>Apps. Tap an app and scroll down to the Permissions section.update. When you update an app manually, examine the screen carefully for a new Permissions section.

On the other hand, you may prefer to look up a permission and see what apps have it. For that you’ll need the free Permission Explorer app, which, you’ll be glad to discover, “requires no special permissions to run.”
If you’re truly determined to keep an app but deny it some of its permissions, you’ll have to root your phone, then use an app like Permissions Denied. But that’s a dangerous process and not one to do lightly.
via Answer Line: Creepy permissions for Android apps | PCWorld.