This is kind of dated, now, but I'm behind on my Technology Review reading (note to self: must subscribe!!), so I just saw this about Google & privacy:
In Google We Trust // Internet users should think carefully before relying on GmailTechnology Review, Dec 05 / Jan 06
by Simson Garfinkel.
"Google's Gmail raises important questions about the security and privacy of our personal information -- questions that should matter not just to users of the free Web-based e-mail system but to everyone who exchanges e-mail with Gmail users.
"And since the technical underpinnings of Gmail might very well be the prototype for the next generation of desktop-computer applications, the answers to these questions potentially affect everyone."
Garfinkel talks both about the privacy implications of Google and about the security of your data. For privacy, since Google has all of your mail since you joined Gmail (up to 2 years ago?!), criminal or civil litigation could go after your Gmail archive at Google if they needed evidence. The security issues may mitigate that: Garfinkel reports that Gmail's
Terms of Use don't indicate that your mail will be retained indefinitely. So they could "lose", or lose, your data at any time -- and you'd have no recourse to retrieve it.
There are some interesting implications for the future of "free" online services, too; Garfkinkel posits Google's users as products rather than customers.
Definitely worth a read.