This YouTube video provides a good basic introduction to just what information Google is tracking when you make a search.
Keep in mind that if you have a Google Account (which I do) you are providing Google with far more than IP numbers and cookies. When using Google tools we pay with data, not money. Each 'Free Tool' provides a stream of information that Google is very adept at turning into advertising profit.
I'm quite comfortable with this symbiotic relationship. Are you?
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