As it is lately explained in google blog, they collect user data (search keywords with IP addresses) randomly. They say that they log only %2 of the searches in a random fashion. I really appreciate Google's affords to provide us better services but in my opinion privacy of millions is more important... Could you please share what you think ? You can also read more of this from my blog if you want.
Google isn't the only one that does that, I'm pretty sure that all the search engines do the same thing. I know that Yahoo does, they even have somewhere that you can go to opt out of being watched. At least they use to!