There's not a lot to add to this warning from the Electronic Frontier Foundation:
Google today announced a new "feature" of its Google Desktop software that greatly increases the risk to consumer privacy. If a consumer chooses to use it, the new "Search Across Computers" feature will store copies of the user's Word documents, PDFs, spreadsheets and other text-based documents on Google's own servers, to enable searching from any one of the user's computers. EFF urges consumers not to use this feature, because it will make their personal data more vulnerable to subpoenas from the government and possibly private litigants, while providing a convenient one-stop-shop for hackers who've obtained a user's Google password.
Good times, these.