When the new Google Desktop was released, I was one of the first to warn about potential big-time invasions of privacy because your data would be stored on Google servers. But, in fact, those fears are overblown -- while there's potential danger, it's relatively small.
It turns out that Google stores very little of your data on its servers, and what it stores generally stays there a very short amount of time.
When you first run the software and index your data, that giant store doesn't go to the server. Instead, only subsequent indexed data goes there. And that data will usually live there for a short amount of time. As soon as another of your PCs gets the data, your information is deleted from the servers.
The result? At any one time, very little of your information is stored on Google servers. So even if the company gets a subpoena, they won't have a great deal of information to turn over.
Additionally, you can select which folders to index, and which you shouldn't. And, of course, you can choose not to have your data stored on their servers at all.
So while the privacy-invasion potential is there, it's not as big a problem as I first thought. In fact, I've downloaded the program, and use it now on several PCs. It's one instance in which, for me, the benefits outweigh the potential threats.