Three words: I don't care. Google (or my family, or my friends, or whoever) can read all my e-mails and searches for all I care. If I knew that I had been assigned a particular employee at Google whose job it was to read all content I ever received or sent through their services, the only reason I would be disappointed is that I would be making someone's life very boring. But that's not the case, and in fact that sentence about "not expecting privacy" refers only to the automated systems that "read" (more like "parse") your e-mails to generate ads. And I'm fine with ads, they make the world go 'round and I don't even use adblock. Tracking for personalized ads? Good! I like seeing Newegg products in my peripheral on Youtube.
Bottom line: Gmail is an excellent service that makes my life much less of a headache. If they have automated programs that parse my e-mails to make ads to pay for the people who make it better day by day, I'm fine with that. And I'm not going to enter in to this whole "Google is a government/secret service/NSA shell" conspiracy. They may hand over some information because they're required to by law, but I bet they don't like it any more than we do. Go after the government, not Google.