Here are some simple facts for you" Yes, Google, especially if you use a lot of their services, such as Google Docs, Gmail or Google+ knows a lot about you. If you just search a lot on Google, Google knows a good deal about what interests you. So what! It's been that way since day one. If you use any Internet service or Web site a lot they know a lot about you.
How do most "free" Web sites pay for themselves? With advertising. How do they know what to advertise to you? By watching what interests you. Google does it. Microsoft does it. Everyone does it.
In fact, if some of the people in such a tizzy about Google actually read Google's privacy policies, they'd discover that Google has always collected and used your information. What? Did you think those ads on the pages that had some sort of relevance to you appeared by magic?
It seems Google didn't do that then, but they could have. Now, with more services than I can keep track of they've decided to officially combine all their user data. Why? Well, as they say in the draft of the new privacy agreement: "We use the information we collect from all of our services to provide, maintain, protect and improve them, to develop new ones, and to protect Google and our users. We also use this information to offer you tailored content - like giving you more relevant search results and ads. "
If you don't like what Google knows about you, adjust your Dashboard settings. Don't like Google knowing about what you've been searching for? Go to your Google Web History page and hit the pause button, to keep it from grabbing any more of your searches, and then choose "Remove all Web history." Congrats. You're done.
In short to everyone having fits about big, bad Google and its new privacy ways I can only say wake up and smell the coffee people. If you're on the Internet you're being tracked. As my good friend Rob Pegoraro puts it on Discovery News, "Doing almost anything online requires some faith that strangers will protect your data as it traverses their servers. You don't have to trust Google, but you have to trust someone." I choose to trust Google.