That is a horrible, horrible concept that has been the idiotic view of the same people who BROUGHT us the Patriot Act.
"You'll only care if you're hiding something." No, I'm not hiding something, and guess what? STILL CARE.
Thing is, if the data they kept was totally anonymous (i.e., no identifying IPs) then I'd have NO problem with it. Actually, I don't even mind the IPs under the right reasons. I think it would be GREAT if marketing was a little more sensibly done and people could properly research and target products instead of throwing spam at a wall and seeing what sticks. Good research data is great, and if it gives me better products and better awareness of the products, that's a win for EVERYONE. I'm not anti-marketing, I'm anti-spam-i-don't-care-about.
But the idea that this data can be taken by anyone else and used for purposes outside of Google's scope is, to say the least, frightening. It makes me wish there was an alternative that could tell me they faithfully will not hand over that data if it's retained, as well as explaining what is retained and how it's disseminated to data miners. Unfortunately, there's no GPL search engine that I'm aware of...