Newsweek's declaration of "The Year of the Matrix" points to a global obsession with the three-part series by wunderkind directors Andy and Larry Wachowski. This time out, their collaboration with special effects oracle John Gaeta – reportedly the most expensive and technically complicated 14 minutes in film history – has drawn a lot of attention. The Matrix Reloaded has new special effects and new characters; both will provide the massive Matrix cult – action flick junkies, philosophers, pop culture theorists, cyberpunks, geeks and nongeeks, and everyone else – with their drug of choice.

Set in 2199 (or close to it – the machines have erased real time) The Matrix Reloaded pits what remains of a free, rebellious humanity against energy-sucking machines that have conquered earth. Expectations for the sequel – will it be bigger? better? – are fantastically high. But there's more to it than special effects and a bigger budget: what's changed radically is the offscreen world we live in.

Since 9/11, important thematic elements of the Matrix trilogy have become closer to our lives, as close as the cell phone, Wi-Fi, computer, handheld PC, and other digital communications devices. The films' surveillance systems bear more than a family resemblance to the real-life ones that today are digitally plugging into to the devices we happily shop for and have come to depend on.

The trilogy opens with the story of a computer hacker named Neo (Keanu Reaves) and a rebel unit led by Morpheus (Laurence Fishburne), who believe Neo is "the One," able to break the computer code of the Matrix and free humanity before the machines reach Zion, "the last human city." The second and third installments, The Matrix Reloaded and Matrix Revolutions, continue where the first leaves off, following the action as it builds to the final battle. Most of the first film takes place in the green confines of the Matrix – "a computer-generated dream world," according to Morpheus, used by the machines to keep humans living in absolute ignorance while they're grown and harvested to meet the energy requirements of their captors. Protagonists in the films need telephones to travel between the Matrix and the real world – a state of affairs not too far removed from our reliance on cell phones and Web sites in cyberspace, where our personal interests – political, sexual, commercial, you name it – leave digital footprints that don't easily erase.

The movies are about much more than computers and action. The Matrix is as much a surveillance system as it is an illusion-making machine. When Morpheus holds up a battery and tells the disbelieving Neo about a system built "to keep us under control," the moment extends far beyond a cyberpunk movie. Cumbersome and clichéd Big Brother dies, and Morpheus heralds a symbol of surveillance fit for digital times.

Post-9/11, spying – the technology and the laws permitting electronic surveillance – has undergone enormous changes. Privacy activists, technologists, and scientists are struggling to make it palatable for popular consumption; meanwhile, John Poindexter, John Ashcroft, and George W. Bush, appealing to a nation buffeted by fear and frustration, have accelerated their efforts to implement the new system.

Parallels between Matrix-style surveillance and the system being mounted by the Bush administration are undeniable. By itself, the controversial Total Information Awareness program is the most colossal surveillance project ever conceived. When TIA is combined with laws like the USA PATRIOT Act, and new technologies, the world starts resembling the stuff of cyberpunk. On the other side of the surveillance question, privacy activists are working hard too, identifying issues and inventing strategies at events like April's Computers, Freedom, and Privacy Conference in New York. Lawyers like Peter Swire examine spy-friendly laws, and technology experts like Bay Area nuclear-freeze activist and digital folk hero Phil Zimmermann discuss how to improve encryption technology to protect privacy. Despite legal and technological intricacies, the Gordian knot at the busy conference was less technical and more human: science got us into this trouble, but in the long run only people can win a war against machines and the machinations of the state.

The Bush administration is investing hundreds of millions of dollars in surveillance technology, including data-mining programs like CAPPS II and TIA that rapidly sort through gargantuan amounts of material in search of patterns. A day's worth of wireless communications, e-mails, or credit-card transactions can, for example, yield considerable information. The hope is that worldwide spying will lead to the capture of terrorists. But privacy advocates worry that the lives of loyal, innocent citizens will be ruined as they stumble into electronic dragnets aimed at criminals.

More than a few individuals in the more than 4.5 percent of the population now on government "watch lists" have found themselves trapped in the legal and technological purgatory created since 9/11. Aware of the dangers, Swire tried to address these types of issues as chief counselor for privacy in the Clinton administration. "More and more," he observed during an interview at the conference, "you can think of your bank or your phone company as a deputy of the state when it comes to turning over records about your bank transactions, your e-mails, and your social security number, your phone calls." Swire's position has not been filled since he vacated it in 2001.

Ones and zeros define and envelop Americans as much as they absorb characters in the Matrix. "The Matrix brings up a lot of different issues of concern to us," said Chris Hoofnagle, legislative counsel with the Electronic Privacy Information Center, during a recent interview. "For example, one that's been on our minds a lot lately is location tracking. Because of a very well-intentioned federal mandate that requires cell phones to disclose location when you dial 911, many different cell phones will be transmitting what's known as automatic location information to the carrier." Noting the similarities between fact and fiction, he added, "Something you see in The Matrix is the idea that you can track somebody though a cell phone. This is becoming a reality."

Location tracking is only a small part of the debate triggered by legal and technological initiatives. Just five days after The Matrix Reloaded hits theaters worldwide, debate in Congress will reopen about TIA. The most controversial and Matrix-like of the Bush proposals, it not only clears the way to gather all available information about U.S. citizens but also allows information gathering about millions of people around the world. And under a not-yet-introduced bill known as "Patriot II," secret arrests, warrantless surveillance, and indefinite detentions would become part of the so-called war on terrorism.

Defenders of the Bush surveillance agenda don't see a basis for any comparison. "TIA is not the Matrix," said Michael Scardaville, homeland security policy analyst with the Heritage Foundation, from his Washington, D.C., office. "The idea that programs like TIA are comparable to the Matrix goes well beyond even the comparisons to George Orwell's Big Brother. A research effort designed to better analyze database information is not the same as a vast computer machinery world that enslaves people as batteries."

Hoofnagle and other electronic privacy advocates generally agree that the blockbuster Matrix movies don't exactly predict the future of Bush surveillance initiatives. The surveillance aspects of the films don't reflect contemporary surveillance with scientific precision, and surveillance is only a subtext in the film. For many, however, the Matrix films offer a more contemporary and hip metaphor than industrial-age 1984 does at a time when digital images have overwhelmed written words in the popular consciousness.

Matrix fan Zimmermann can move anonymously in cyberspace with Pretty Good Privacy, software he developed. It scatters digitally encoded information so it cannot be understood by unintended users – like government operatives. The most popular publicly available encryption software in the world, it effectively provides the user with privacy in an electronic world that challenges privacy. It is so good that in 1996 the U.S. government tried to put Zimmermann in jail, saying that PGP might get into the hands of terrorists. Zimmermann fought back, and with lots of help from the privacy and tech communities, he won.

PGP empowers people to safeguard their privacy. "There has been a growing social need for it," said the understated inventor. "That's why I wrote it – if privacy is outlawed, only outlaws will have privacy."