I think the Privacy policy is only important when you are trying to sell or trade something. Or if you are making somone's subscribe to some of your email or other things. IN such case it is necessary as you are confirming that you will not sell their data to anyone and nor even you will make misuse of their credit card information.
You are wrong. If you have Adsense, you have to have a privacy policy. Otherwise you can lose your Adsense.
You won't get banned if you don't have one, but if you use a policy from someone else's site you run the risk of a duplicate content penalty. Speaking of policies, check out this over-the-top privacy policy for an SEO business: http://seocairns.seovoodoo.com.au/privacy/
Man there are a bunch of people posting in this thread that don't have the slightest clue...and some call themselves experts even. YES you need it.
it is advisable to place a privacy policy on ur site or blog. Very simple to do it actually. Most sites will have it or you can Google it. Well you can copy it down, rewrite it to suit ur site and then have it up ! Takes u at most half an hr. Why take the risk ?