This is old news, back in August Google told us they are now crowdsourcing traffic data in order to provide better and more accurate traffic reports on Google Maps. Let me quote Google:
When you choose to enable Google Maps with My Location, your phone sends anonymous bits of data back to Google describing how fast you're moving. When we combine your speed with the speed of other phones on the road, across thousands of phones moving around a city at any given time, we can get a pretty good picture of live traffic conditions. We continuously combine this data and send it back to you for free in the Google Maps traffic layers.
Why do I bring this up now? Well, a Google Maps Help thread has one Google Maps user asking how Google has traffic data for local streets? He said, "Just curious as to how google maps aggregates the data for traffic conditions of local surface streets, not freeways. Is it through the sensors in the streetlights?"
Useful, but a tad scary. I tested it on some of my local roads that I know are always congested and it does indeed work.
Forum discussion at Google Maps Help.