Google is keeping our privacy in that they aren't supplying information to anyone other than what you can already mine from a variety of public sources. They are not giving user search info to government agencies - to do so would immediately kill their market share while not really improving US security. People would just switch to the next largest search engine and the government would be back to square one.
Sadly for Google, being the big dog means that everyone wants to knock them down a notch. It's like being the head of a major government agency - everyone gets on your case while the second in command is allowed to float. The government is busily being a pain to Google, but I bet they aren't bothering any of the other search engines.
Note that I don't really care much if they go through any search results relating to terrorism - that's a matter of national security and anyone stupid enough to search for nuke plans on the Internet deserves what he gets - but once they start investigating civil matters based on search results, it becomes a rather big invasion of privacy. Beyond a certain level of invasiveness, information should only be allowed to move from the police to the national security agencies, not the other way around.