1. Is the goal to provide real end-to-end protection where even Yahoo can't help the government snoop even if compelled to by law? That is hard.
2. Is the goal to prevent the government from snooping without involving Yahoo - that is, to make sure mail transiting between Yahoo servers and between Yahoo and other email server and Yahoo and those sending or receiving messages is encrypted? This may help a little but using https: and secure smtp between mail servers gets you most of the way there.
3. Is the goal to prevent the government from snooping without involving either the sender's computer, the recipient's computer, Yahoo, or if the recipient trusts his mail provider with the private keys, the recipient's mail provider? If so, then PGP with Yahoo having either the private keys or a means to compromise the recipient's computer will meet Yahoo's needs.
I suspect Yahoo wants at least #2 but probably #3.
As long as Yahoo is up-front with what they are delivering and doesn't gloss over important details, #2 or #3 could be useful and better than what's out there now.
Example press release:
THE_FUTURE - YAHOO_HQ - Yahoo is proud to announce PGP-encrypted email.
Yahoo is proud to announce PGP-encrypted email. Yahoo has partnered with FOO, BAR, and BAZ to provide a public-key registration service. Users can upload their public keys to FOOBARBAZPGPKEYREGISTRY.com. Yahoo users who wish to send encrypted mail to anyone with a registered public key can do so easily.
For those needing the same level of security as PGP, Yahoo has published specifications for plug-ins to existing PGP software. For those whose don't need quite the same level of security, Yahoo offers plugins for all popular web browsers to make sending and receiving PGP-signed easy.*
Why are we doing this? INSERTMARKETINGSPEAKHERE.
* Using the Yahoo plugin decreases security: Due to the nature of plugins, it is technically possible for Yahoo to deliver a plugin which compromises the user's security. Yahoo will make every effort to not do this unintentionally and will intentionally do this only pursuant to a legal process. For this reason, customers who wish to prevent being affected by such a court-ordered compromise should use software that is not published by Yahoo to send and receive PGP messages through Yahoo. The source code for the standard versions of all PGP-related Yahoo plugs can be found at FOOBARBAZPGPKEYREGISTRY.com/Yahoo/software .