This is a very interesting article about how Google knows your every move: http://www.motherjones.com/news/feature/2006/11/google.html
I don't think there's proof that Google has done anything completely crazy yet (depending on your stance on China and the whole bit), but I can see a day when, for example, somebody says they have proof that a candidate for president searched for "join communist club" or something controversial like that, when really the candidate's eighth cousin was using the computer that day. Maybe some day there will be an open-source version of Google, where advertising doesn't matter, and searches don't get tracked along with personal information.