The danger comes when the federal government demands records of our Internet usage and then runs the data through badly-designed "data mining" algorithms. In the specific case of Google, the Feds are not seeking any individual or identifiable information. But spikes and anomalies in the data could send them scurrying for more specific information. If it sees a high incidence of searches for "Anthrax" (the microbe, not the band) or "Jihad" over a set of days, the FBI could request deeper data. Then you could be in trouble.

For instance, you might want to read all you can about Al Qaeda before you take the Foreign Service Exam. Your innocent searches could be misinterpreted as solidarity instead of curiosity. All of a sudden, you find yourself a "false positive." Worse, such a foolish process can't help but yield "false negatives," letting really bad people slip through while we place way too much faith in the power of raw data and fast computers.

As to the import, Siva says it's very important - and ridiculous. He explains why. He then adds that the reason this is possible in the first instance is because Google is allowed to keep our records.

....the real problem here that Google collects and keeps all our data in the first place. We must demand that Google purge its servers of our personal data. If it won't we should demand that Congress act to protect us. I know, the thought of Congress actually working to protect Americans is painfully out of date. But hey, I can't give up hope.