I believe Google doesn't mean to do these things. Btw, Google has a car driving around getting street view pictures and happened to see things like this. I have no problem with Google because I am not going to be doing stupid things to be seen like this.
The service this is from is pretty useful really, it's just unfortunate that there's people who don't want to be in the images. Can you imagine how many man hours it'll take to censor all those people? I believe they've started doing just that though, so give it time and they'll have more or less everyone covered. People would complain if they pulled the service because of it more so than people are moaning about their "priavy". If you're out in public where the images were taken anyway then you're not really "private" now are you?
So far Google hasn't seen anything (that I know of) that anyone couldn't have seen by being in a public place. Its no different than you taking a picture of local store to put on your blog and someone happens to walk through your shot. The perceived difference would seem to be the amount of hits per day but why should anyone be penalized for that?
As for their EULA, if it makes you uncomfortable than don't use their software, I use gmail and thats about it, though I may reconsider chrome once add-ons are enabled.
Google is George Orwell's Big Brother. They control everything and there always watching. But their apps are great and I use them all. Worried not really, but I probably should be. They now more about me then even my own family with all the data they collect.