There's no shortage of people ganging up on Google, criticizing the move, saying that this is the end of your privacy, that this is not what people expected out of Google and so on and so forth.
Given the general feeling towards Google
, after the whole Search Plus fiasco, which hasn't blown over yet, it's easy to jump on the bandwagon and pound on Google.
But, the fact is, the new policy isn't all that different from the previous one and you are no less 'private.' Google already had all of this data on you. It was on different products, but it was there.
In practice, it meant that ads in Gmail were customized based on the contents of your email, but not on your search history. At the same time, your Google searches didn't take into account videos you may have liked on YouTube.
But most people probably already believed and expected that their data is shared across Google services since it's fairly obvious they're all coming from Google, except perhaps in some special cases like YouTube and to a lesser degree other branded products such as Picasa, Blogger and so on.
It may come as a surprise to some that your search history is not used to customize ads on other sites.
All data is now accessible to all Google products, with some notable exceptions. That's not to say it is actually going to be used. Even if it is, it's not a privacy worry, Google is not collecting more info than it used to.
The data already available will be put to better use, yes, many times to improve ad relevancy. But that's hardly a bad thing, you're still going to get ads, they might as well be ads that may prove useful to you.