As with most such things, Google’s Web History isn’t really good or bad. All it does is create a giant file of all the places you surf — with your consent, of course, once you install the Google toolbar and activate the feature. What is in that giant file is up to you, obviously (and Ionut Alex. Chitu, the intrepid Google detective, has some tips about how to pause the feature if you go somewhere you don’t want Google to see). And what happens to the file is up to Google. So how much do you love Google?
As Danny Sullivan describes in a long and thorough post, there are many benefits to what Google is doing — and one of those benefits is that the company is at least being fairly transparent about the kind of information it keeps. Other companies, as he points out, keep similar kinds of information through cookies, but reveal relatively little about what they do with it.
As Anil Dash says, many people will get the heebie-jeebies over this, and as such it is yet another test of how much goodwill there is left towards what has become an Internet behemoth. Google blogger Matt Cutts has some thoughts here.