Computerworld ran an article identifying what search engines such as Google, Yahoo, and Microsoft Live Search all record and retain in their vast data banks, e.g., any term that you query, in addition to the date and time your query was processed, the IP address of your computer, and a cookie-based unique ID that unless deleted, enables the search engine to continue to know if requests are coming from that particular computer, even if the connection changes.
Microsoft Live Search also records the type of search you conducted (image, Web, local, etc.), while Google additionally stores your browser type and language. And when you click on a link displayed on Google, that may also be recorded and associated with your computer's IP address.
Although ordinarily, there is not much to worry about, since the server logs don't associate search terms with personally identifiable information, such as your name or e-mail address. However, if you have an account with or have registered for any of the additional services on a search engine site--e-mail, social networks, calendars, shopping lists--it's feasible that that connection could be made, says Brad Templeton, chairman of the board at the Electronic Frontier Foundation, a group that protects liberties and privacy in cyberspace.
Lately writing about searches leads me to recommend alternative search engines such as Scroogle which claims to scrape the identifying information out of your searches.