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.