While Google may in fact be omniscient, at least in relation to the web, at least they aren't in your face about it like the Eye of Sauron was. Geek-addled facetiousness aside, while the backlash may not have been what some expected, any time the words "Google" and "privacy" come together, it makes for an interesting topic. From Google's perspective, it's all about consolidation and personalization, something their disclaimer states quite clearly:
If you’re signed into Google, we can do things like suggest search queries – or tailor your search results – based on the interests you’ve expressed in Google+, Gmail, and YouTube. We’ll better understand which version of Pink or Jaguar you’re searching for and get you those results faster.
The privacy concerns about the sharing of this personal information across multiple platforms seemed to be addressed with the confirmation that Google users can indeed opt out, something Danny Sullivan discussed with Marketplace, which was broadcasted over NPR's airwaves. Sullivan explains what Google's privacy changes to the everyday user:
"...YouTube can see maybe what you've been searching on on Google web search and say, oh, you're really interested in skateboarding so I'm going to prepopulate the YouTube homepage perhaps with a lot of skateboard videos."
The full audio of Sullivan's Marketplace appearance is also available: