https://www.google.com/intl/en/policies/privacy/
Now if you are not happy with the new policies you may use few tools provided by the company to protect your privacy as Google always work as a user driven company.All the tools are listed at the link below
http://www.google.com/intl/en/policies/privacy/tools/
Few important ones are like search history which keeps a record of your performed searches when you were logged in to any of your Google account,if it is turned on you may turn it off and if its not turned on you dont have to worry about it.Another one is Youtube search control using which either you can clear or pause your viewing history depending upon the severity of the searches you did for videos ( hope you understood me ).Google strongly believes that " Users should be able to control the data they store in any of Google's products.Our team's goal is to make it easier to move data in and out ",so using data liberation you can take your information out of Google products.
Now as we all know that to cook a dish we need to know the ingredients required for the dish similarly to use the tools we need to know what all data is shared with Google which you can check and modify here in your Google Dashboard like your opened Google docs,Picasa pics etc.If you are not sure about something you can copy the link from your dashboard and open it in any other browser where you are not logged in to any Google account then you can see if the data is viewable by others or not.
The new privacy policy from Google is criticized by many as incase there are more than one user on a single computer and if one of the user uses anything on Google lets say a kid searches for an adult video (assuming the birth date is not real in the kids account ) in his parents absence and forgets to signout of his Youtube account,later on when anyone from the family uses the same service to search their favorite video they might see adult videos in related searches which they dont intend to search.So the best option from now onwards is use either of the Google products or services like your mysterious searches in alternate browser (without logging to your Google account) that you do not normally use like for me its IE ( though I am the only user for my computers moreover I dont do mysterious searches lolz) and rest keep on using email and other services while you are logged in to the regular browser.What do you think as the best alternative other than this?