Personally, I think that Gmail is an absolutely wonderful service. The ability to access e-mails from any type of terminals, to instantly search in e-mail archives using free text, the anti-spam engine is excellent (ahem! until now!), the proper treatment of threaded conversations, and the general friendliness of the interface, this is all just great. And yes, it's free for Gbs of archived e-mails... Actually, it's so easy to search that I now archive quite some misc information in e-mails, as I know I'll find it again within seconds.
So yeah, they parse the content to display the ads on the sides (which are inconspicuous enough that I never notice them!) and make a living out of it, but I really don't care. Frankly, the best privacy is to be part of so many billions of archived e-mails... Who will go through that to find out about my dark inner thoughts...