Running a DNS service doesn't give you the ability to see which pages someone visited when they navigated a website - just that they resolved that website's host name for some reason.
It can log that you went somewhere that Google could not otherwise track you. And not just websites; mail, SSH, anything else. I'll wager a fair few people's attempts to avoid tracking for certain activities, clearing cookies, private mode, whatever, has been thwarted because they forgot they'd set this up.
That's a big distinction though. I don't think Google has the obligation to make sure users are educated and informed. The deceptive practice of Facebook with Onavo is what people object to.
True this. I think it was on Ars Technica that I was downvoted to oblivion for raising the privacy implications of Google's DNS service.
There is a huge segment of the semi-tech literate crowd that feel wise for using it. I think it's because it's the only time they get to type in an IP address and it makes them feel l33t.
To be fair, Google DNS is more trustworthy than ISP DNS, and if you're using Chrome, you're not exposing anything that Google isn't reading anyway. DNS requests are much less informative than full browsing history.
It is probably better to use OpenDNS, but they used to do the same spammy redirect on NXDOMAINs that ISPs do (I think I heard they stopped that). To be honest, the real reason I don't use them much anymore is that their IPs are harder to remember. It's easier to do 8.8.8.8 or 8.8.4.4.