Image by ShashiBellamkonda via Flickr
The thing that really stuck with me is that privacy, like many things, is so critically dependent on expectations. Chris pointed out - (obvious once you hear it) - if you are transparent upfront about what you are going to do with user data, then users will be OK with that. (The ones that aren't OK with it, well they can make an informed decision to not participate; no one gets misled). The point is that if you set someone's expectations that certain online behavior (sharing photos online, "friending" other people, posting a video, tracking click behavior, targeting ads, etc) will be used in certain ways or publicly shared, then users will generally be OK with that. Don't surprise them.
It's when online services are opaque about these things that they get in trouble. So, set expectations upfront by informing users what data of theirs or about them is collected and how it will be used.
As Chris said, if you're not upfront and transparent with your users, then you probably have something to hide. I'll add that it can make you appear evil if it's intentional, or otherwise apathetic and ambivalent about a very sensitive issue.