Google claims that they only intend to use this information to enhance services and deliver content that is of higher value to you as a user. Many people want this, and choose to trust Google.
Others choose not to trust Google, or more importantly -- how that information might be used if exposed through legal process or security breach, or a future policy change. There is a balanced article about this on PC Magazines' site here
The following passage is quoted from Amit Singh, the leader of Google's enterprise business, in a Fortune Magazine article: "So what's next for Google Apps? Imagine you're at an airport and based on your social graph you know that at the next gate there's someone you're in touch with through work. We're moving from asking the system to do something for you to the system suggesting and assisting you. You can do a lot with location for enterprise users -- you'll see some product launches in this area. We have calendaring and tasks and email, and you'll see us deeply integrating the people side of it. Google+ and Google Apps are coming closer and closer together. You now know where someone is and you know how they're connected to someone else. So your phone could prompt you to go introduce yourself. This has implications to sales."
Is this creepy? Many people may find value in this, while privacy advocates shudder at the "Big Brother" implications.
We must also bear in mind that all of the information collected by any online services can be subpoenaed. This could help you or hurt in a legal case, but many people would prefer not to have their private lives co-mingled with their online public or business persona. Once the long arm of the legal system gets involved there is no "off switch".
These new changes do not necessarily mean that you should stop using Google. If Google's policies are fine with you, keep using Google apps and services. Otherwise, there are various controls you can use to tailor how Google uses your information, but that will not stop Google from collecting it. You can also choose not to use Google products and services, but bear in mind other providers of online services and apps are logging and collecting information and each needs to be understood separately.
Read terms of service and privacy agreements. If they are vague, sweeping and subject to change without your express consent; assume they will protect only the provider.
I will be looking into the differences between the privacy policies of online search providers, and hope to reveal my findings in a future message or blog post on our web site. Please feel free to contact me or your NST Team if you wish to discuss this.
CEO, NST Systems