At first it read: That users had "a perpetual, irrevocable, worldwide, royalty-free, and non-exclusive license to reproduce, adapt, modify, translate, publish, publicly perform, publicly display and distribute any Content which you submit, post or display on or through, the Services." After the change it read that users could "retain copyright and any other rights" that they already hold in content they submit or display using the browser."
I do believe that it was a mistake, as they said they used their standard terms of service.
I don't think Google has any interest in what I might be writing in "Documents", and don't think there is any need for them to index such information. It would annoy all the users and we'd use something else instead. There is a fine line to tread when collecting user data to train machines, it has to be annonymised, and of course people have to agree to it, which we all do when we tick that box. Frankly I think it would be an enormous shame for Google to not collect user information (such as behavioural analysis for example) through Chrome. This is how research is done, you need to learn from somewhere.
Anyway, Google have reacted to the outcry and have released a nice video explaining the Google search privacy policy, and also a blog article. They state: "we'll anonymize IP addresses on our server logs after 9 months. We're significantly shortening our previous 18-month retention policy to address regulatory concerns and to take another step to improve privacy for our users."
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