Addendum: I am not suggesting that people who are concerned about privacy (or even everyone who has problems with Gmail) are too stupid to read past headlines. There are lots of legitimate concerns with privacy and the web that are definitely worth discussing.
In fact, there are some HUGE privacy issues I'm very concerned about. They mainly have to do with the government. Any condescension in my tone was because of frustration at certain people and organizations who seem to be using the spotlight of Google for their own PR, while ultimately diminishing their cause (privacy), because they're misleading people instead of educating them.
Lastly, I didn't like the idea of content-sensitive ads in my email at first either. But it doesn't seem creepy now. (And yeah, I work here, so I'm not a good test case.) And also? If you have stuff you really need the government not to read, you probably shouldn't be emailing it. At least not unencrypted. And it probably doesn't really matter if you use a big, centralized service like Gmail or Hotmail or your local ISP. The government can get data from any of them. (And as far as non-government invasions go, I bet your small, local ISP has less-stringent controls on who can get to your data than Google does. And you're one of a smaller number. I'd rather be semi-anonymous because of the size of the system.)