I heard their mainly just writing one Privacy Policy for YouTube, Gmail, Google Plus, Blogspot, and other Google owned websites, but I find the message kind of annoying since it is on the top of every Google owned page instead of on a less in-your-face place like the sidebar or bottom.
I think as long as you post respectable videos on YouTube, don't troll on Google Plus and don't use blogspot to make a hater blog then your privacy would be fine since your gmail account is still set to private on Google sites, and you have nothing to hide since you can use a fake username and info on various Google sites.
I just use YouTube, Google Plus, and Blogspot to promote my content and websites to try and take some of Google's members to my site and videos, so there not much private stuff for people to find.
I heard it was a bug in Safari, and Google Ads use the data to just show you Ads which you maybe interested in based on your browsing habbits, so you get fewer unrelated ads for Womens underwear, cash for gold, and other topics which don't match your interests. I also heard they use the data to provide better search results for you, so you get fewer search results when searching Google.
I think having one privacy policy might be better for most people since you don't have to read a different policy for each Google own site, and just read one to know about your privacy rights when using sites owned by Google.
Yes, probably they are also using it for Google Analytics to help web master who use Google Analytics write better content based on keywords which users used to find a website, or discover topics which are in demand based on keywords in the Keywords section of Google Analytics.