Hi Polonus
it's an interesting topic, very interesting how a company like Google do this... ,
I posted same in my blog 3 days ago (Jan 26, 2009).
but, after all "Spy" and "Advert" etc... is not it needed for google to collect enough data for his Search Engine and it's own Database?!
I agree it should watch users activity when it's disabled, but when it's On by default, how it can be a "risk" if it collect our web usage data? personally I don't think if Google can be a risk for my life if it collect some data from my history and track how many times I visit which sites and what I did in those sites... I just think how Google can use this data to improve their service for a better search and web tools, that's the way I think.
I use Google Chrome, in my Google Account Web History is enabled, I use Google DNS and I'm happy with these! (also I use some other services such as Voice, Document, Similar Page, Feed-burner, Blogger, Reader, Gmail, Bookmarks, Health, Analytics, Sites, Calendar, App Engine, Contacts, Tasks, Alert, Transliteration, Translate and groups) and I've never felt if Google Spying can be a risk for me really! always I believe even if suddenly any of my personal data being sent to Google during their data collect they wont use it and I am safe because I trust Google!
after all, I don't use Google Toolbar! never found it useful! in IE it cause IE being unstable and also in Firefox it slow down FF. everything that Toolbar bring can be found in Firefox itself, for example search is right to address bar and shortcuts to Google Services is in Bookmarks bar of FF.
I know 99% of the users in this forum would hit me and keep kidding me because of the way I think!