Google doesn't "read" your emails. The information completely secured from human eyes. A computer looks for words and phrases and tries to match ads to email content. Sometimes this is helpful, but the advertisers only receive anonymous data and no humans at Google or anywhere else read your data.
The information completely secured from human eyes
That isn't entirely accurate. There has to be a way to access mailboxes for troubleshooting/compliance purposes - A couple years ago, a Google engineer got fired for snooping into some kid's mailbox.
This still counts as "reading" your mails. Google analyzes my email and comes up with a categorization, stored somewhere on their servers, attached to my account, that says something like "Show this guy ads about computer stuff". If that information is subpoenaed, it will be revealed that computers, programming, and other technical things are among my most frequently discussed topics.
By itself this information is innocuous, but in the right context and with just a pinch of the heartlessness of a giant computer system, the wrong set of categorizations could cause a really big problem.
However there are really three usage cases where I see this potentially becoming a problem:
1. Google sells data to advertisers directly, without anonymity.
2. Google is rendered insecure and the encryption they use is cracked.
3. Government forces Google to hand over data about individuals or large swaths of individuals.
The most likely scenario is number three, which already happens, and this can happen to any information stored anywhere (bank accounts, post office and online).
Google would face strong public backlash for selling data to advertisers (#1)directly and would have to change their user policies.
Google spends untold amount of money on #2. That's not to say they are completely safe or trustworthy, but it is to say they work very hard at protecting that data (for your and their sake). This situation could just as likely happen to any web provider, linkedin being a recent example.
My biggest fear is what happens if the government gets the power to subpoena individuals based on "categorizations" or "keywords". Then I think privacy becomes a serious issue for Google.
For now. But what happens when data mining technology increases to the point where they can deduce real facts about you as a person from all this data they're collecting. I think this is what people mean when they say Google "reads" your email.
"But what happens when data mining technology increases to the point where they can deduce real facts about you as a person from all this data they're collecting."
Like that NYT article "How Companies Learn Your Secrets" on buying habits (at Target) of pregnant teens.
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