They can turn on your cell phone when you think you've turned it "off," and listen in on anything the microphone can pick up. Which is probably a much wider range than you think it is.

And it's LEGAL and they can use the eavesdropped-upon information gained in court, against you or anyone else listened to or discussed. Via ZDNet.com:

The FBI appears to have begun using a novel form of electronic surveillance in criminal investigations: remotely activating a mobile phone's microphone and using it to eavesdrop on nearby conversations.

The technique is called a "roving bug," and was approved by top U.S. Department of Justice officials for use against members of a New York organized crime family who were wary of conventional surveillance techniques such as tailing a suspect or wiretapping him.
[snip]
An article in the Financial Times last year said mobile providers can "remotely install a piece of software on to any handset, without the owner's knowledge, which will activate the microphone even when its owner is not making a call."

Nextel and Samsung handsets and the Motorola Razr are especially vulnerable to software downloads that activate their microphones, said James Atkinson, a counter-surveillance consultant who has worked closely with government agencies. "They can be remotely accessed and made to transmit room audio all the time," he said. "You can do that without having physical access to the phone."

Because modern handsets are miniature computers, downloaded software could modify the usual interface that always displays when a call is in progress. The spyware could then place a call to the FBI and activate the microphone--all without the owner knowing it happened. (The FBI declined to comment on Friday.)

The ONLY, repeat only, way to prevent this from happening is to remove a certain battery from the phone itself. Check the article for further details if this is a matter of concern for you.

If the FBI can do this you know that anybody else who wants to--your soon-to-be-ex-spouse's private detective for instance, or the cop who's out to bust your brother in law for dope, or somebody who doesn't like your politics--can do it too.

Let me suggest again that we go back to giving patronage to pay phones and landlines, before the phone companies get away with getting rid of the last of them on the grounds that not enough people use them anymore to make them economically worth supporting.