THERE WAS SOMETHING odd about the black car at the junction of Sutter and Hyde Streets. It was an ordinary saloon. Its windows were clear, and it looked in good condition. And yet, as the lights changed and the car pulled away into the bright San Francisco morning, a question remained. Why was it sporting a luxuriant pink moustache at its front? The moustache is the trade mark of Lyft, a ride-sharing service that began in the city this summer. Its drivers are private individuals who, in effect, rent out seats in their cars for a few dollars a time. Lyft's cut is 20%. It works through a smartphone app. When you register as a customer, you supply your phone number and credit-card details. When you want a ride, you open the app and see a map with the locations of the nearest moustachioed motors. You tap to request a ride, and the app shows you your driver's name, his rating by past passengers (out of five stars) and photos of him and his car. He will probably greet you with a friendly fist-bump. Afterwards you rate him and pay through the app. He rates you, too, so if you are poor company you may not get another Lyft. So that Lyft cars can avoid being classed as taxis, with all the attendant regulation, technically the drivers do not charge "fares" but receive "donations" from their passengers. You may consider that distinction too fine to survive legal scrutiny: a regulator has sent Lyft and two rivals, SideCar and Tickengo, "cease and desist" letters. But John Zimmer, chief executive of Zimride, the firm that runs Lyft, seems confident that it will. Mr Zimmer explains that Zimride, which also runs commuting and inter-city car pools, is named not after him but after Zimbabwe, where his co-founder, Logan Green, saw people sharing minibuses. You might also ask whether people will be willing to accept Lyfts from strangers, or to let strangers into their cars. But Mr Zimmer says the rating system allows both sides to establish a reputation as friendly and trustworthy. A driver averaging less than 4.5 stars will be dropped. The company vets potential drivers carefully, requiring higher standards (for example, on criminal records) than some taxi companies. Lyft has also arranged insurance of up to $1m for its drivers. The ride-sharers spied an opportunity partly because in San Francisco taxis can be hard to find. Uber, which provides black limousines at the tap of an app, saw a similar gap (though its cars are pricier) and has since rolled on to 16 other cities. But the opportunity would not exist had the physical and digital worlds not become tightly intertwined. Every ride using Lyft involves not only a physical trip but also several much longer digital journeys: between the passenger's and the driver's smartphones, via Wi-Fi and cellular base-stations, along telecoms carriers" networks and through switches and routers to and from the servers of Lyft as well as, ultimately, the passenger's, the driver's and Zimride's banks. But it also demonstrates the importance of physical location to today's digital realm. It is central to services such as Lyft, connecting a passenger in one place with a driver in another so that both can travel to a third. Geography still matters. Obvious? Not necessarily. In the couple of decades since the internet began to expand from academic to widespread public use, there have been three main ways of thinking about its relationship with the physical realm. The first, which reached its peak in the late 1990s, emphasised how the digital world would reshape the real one. People everywhere would have access to the same electronic libraries of information, news and comment. Many companies would be freer to choose their location, as better communications meant they would no longer need to be near their suppliers or customers. Setting up businesses would become easier, as would the outsourcing of services that could be supplied electronically. Staff could work just as well at home as in expensive and noisy offices, communicating with colleagues by e-mail or video link. A good deal of this has come to pass. Amazon has shifted book-buying from the high street to the computer, leaving many empty shops in its wake; now it is leading the move from the printed page to the e-reader. Mechanical Turk, a division of Amazon, offers companies "an on-demand, scalable workforce," available around the clock, to carry out online tasks for a few cents a time. Today's worker may leave the office physically but never digitally: he is attached to it with invisible tethers through his smartphone and his tablet. He can take part in videoconferences so realistic that he might be in the same room. Even medical examinations can be carried out online. Geography lives In other respects, however, reports of the "death of distance" (the title of a 1995 special report in this newspaper) have been much exaggerated. As this report will explain, many internet start-ups head for San Francisco, New York, Berlin, London or other hubs to be close to like-minded people. Talk of the "end of geography" (another phrase from the mid-1990s) is about as convincing as the "end of history" when the digital presence of different places varies so much. Forecasts of the "death of cities" have turned out to be even wider of the mark: over the next two decades the United Nations expects the world's urban population to grow by 195,000 a day. A second line of thought puts digital and physical life in separate spheres. Internet idealists declared cyberspace to be independent of governments of "flesh and steel." In online games people thousands of miles apart can battle their way through the ruins of the same imaginary cities even though they will never meet on Earth. More peaceful souls can have a go at virtual agriculture without getting their hands dirty. Their avatars can live out their dreams in the virtual online worlds of "Minecraft." But these two worlds were never really separate. Governments have wielded power over the internet as well as over their physical domains, blocking sites and bashing bloggers. Weapons in online war games, virtual cows in "FarmVille" and playing "Minecraft" with others cost real money. "Cyberbullying" is just bullying. What happens online does not stay online. This special report will emphasise the third option: that the physical realm also shapes the digital one. One big reason for this is that nowadays a lot of people are online wherever they go. More and more people are connected to the internet in more and more places at ever higher speeds. They carry powerful computers, in the form of smartphones or tablets, which are continuously updated with new information. By 2017 the volume of mobile data traffic will be 21 times greater than it was in 2011, according to Ericsson, a big maker of telecoms-network equipment. The number of mobile-broadband subscriptions (mostly for smartphones) will jump from 900m to 5 billion. Local information (where the nearest chemist is; whether there is a taxi nearby) is more valuable to people when they are on the move than when they are sitting at a desk. For the companies racing to provide local services over the internet, maps are an essential foundation. In recent years there has been an explosion of investment in creating online representations of the real world: maps in two dimensions and in three, indoors as well as out, and in ever finer detail. It is possible, once your fingers get the hang of the controls, to "fly" around New York, San Francisco and several other cities, noting the street names and the landmarks and stopping off to learn about places as you go. Giant technology companies - notably Google and Apple, which has just dropped its arch-rival's maps from its mobile operating system - are locked in a struggle to create the best maps and embed the best information into them. Smartphones are only part of the story. By 2020, reckons Cisco, another big equipment-maker, 50 billion devices of various kinds will be connected. According to Wim Elfrink, Cisco's head of globalisation, at present only 0.2% of such devices are. The Earth is beginning to be electronically mapped in many dimensions. John Manley of HP Labs in Bristol envisages a "central nervous system for the Earth," a planet-wide network of tiny, cheap, tough detectors that will see, hear, feel (by detecting vibrations), even smell and taste (by analysing the chemistry of their surroundings), and report back. All this will be especially good for the growing numbers of city-dwellers. Even the devices in use today are already producing huge amounts of data. Most of these data are, and will continue to be, generated in cities, because that is where the phones, cars, buildings and infrastructure to which they relate are concentrated. If those data are combined and analysed, they will make cities better places to live. Cities are already "smart," in that people are more productive when they live in close proximity than far apart. Big data can make cities smarter still. Geography is also important to where the internet's output is produced. Young techies are still drawn to Silicon Valley and similar hubs. And although more and more digital information is kept in "the cloud," the remote servers that make up the cloud are resolutely earthbound, with their location chosen mostly for its climate, its existing infrastructure and its tax regime. The digital and the physical world are interacting ever more closely. The rapidly declining cost of communications and computing power has already wrought huge changes in the way people go about their daily lives. Digital maps and guides will affect the way people behave in the physical world and bring about yet more changes. The digital and the physical are becoming one.