Yes, They know just about everything. They are even coming out with a new process/site/product that lets you see your activity online.. Really kind of creepy. Big brothers on the horizon..
So now Google thinks I like strippers and party all the time? That is funny. I do not mind that they collect all this info. Heck sometimes it helps me, I get random emails for good tire deals when I am looking around, or great rooms in Vegas. Wish they could my bank accumulate more funds though. Really if you do not want to tracked stay off of their site. Use your buddies computer when surfing porn, make sure to hit the gay porn stuff on your way out
google gets informations only when it needs, doesn't collect and store your personel information i think.