Gizmodo has no doubts at all about this. Their blog post is titled "Google's Broken Promise: the End of Don't be Evil." They do a very nice job of contrasting previous privacy policies with the new one, to help make the profound shift more obvious.
What this means for you is that data from the things you search for, the emails you send, the places you look up on Google Maps, the videos you watch in YouTube, the discussions you have on Google+ will all be collected in one place. It seems like it will particularly affect Android users, whose real-time location (if they are Latitude users), Google Wallet data and much more will be up for grabs. And if you have signed up for Google+, odds are the company even knows your real name, as it still places hurdles in front of using a pseudonym (although it no longer explicitly requires users to go by their real names).Gizmodo explains that they consider Google to be going back on its promise to users, on which it built its multi-million dollar business, that it would always place its users' first. The new privacy policy does away with users' fine-grained control of their personal information that previous policy iterations upheld. However, Google does give users time to opt out, so pay attention!
All of that data history will now be explicitly cross-referenced. Although it refers to providing users a better experience (read: more highly tailored results), presumably it is so that Google can deliver more highly targeted ads. (There has, incidentally, never been a better time to familiarize yourself with Google's Ad Preferences.)
And Google keeps wondering why their social media efforts keep falling flat!