Before I came to Microsoft, I always cancelled the "Send error reporting to Microsoft". I didn't know what was being captured or how it was being used. Brief feelings of being spied upon would come over me. So, my choice was always to cancel.
Now that I work for Microsoft, I wanted to pass on the two major points I have learned about error reporting.
First, it's very important information. Whenever a Microsoft Office application encounters an error, the Watson error reporting application captures what was happening with the PC at the time of the error and what error was encountered. It will then prompt you to send this information to Microsoft.
PLEASE, PLEASE, PLEASE send this data to us. Basically, we capture the program call stack data for debugging purposes and the error description. The data sent to us allows us to analyze which errors are occurring, how often and why.
Errors follow the Pareto principle where a small number of issues create most of the errors. We use the frequency and severity as one of the inputs in deciding what goes into future service packs and product versions. This data was instrumental in selecting fixes for the Project 2003 service packs.
Secondly, we are not spying on you. We do not capture personally identifiable information in this process. So, you won't start getting marketing material as a result of submitting this information.
I recently watched a user get an error, saw Watson do it's job and then saw the user cancel the send process. I asked why they cancelled it and basically, they didn't want to take the time to submit the info. I also asked how often had they seen the issue and they said enough to notice.
As a result, we both lose as the user will continue to experience the problem and we will continue to not know about it.
Sending in the data is the easiest way to make sure your issue is reported. In the end, we will all benefit from a better product.