And that is sort of ok. You should always assume that your ISP can and will listen in on the traffic, and take measures to make sure this is not a problem. If not your ISP directly, someone can easily make them or on of their employees do it.
Browse on sites with HTTPS, make sure your other protocols are using SSL or some other published, open and scrutinized encryption. If you really need to hide your destination, use Tor.
I don't think Google is any worse than the other ISPs in this respect, and I think Google has other reasons to become an ISP.
- 1) The other ISPs in the US seem to fucking suck with regards to bandwidth and arbitrary data caps, hurting Google's drive to make everything happen online on their own servers. More players are needed, players who like the internet, not players who actually hates it because it cuts in to their own profits.
- 2) They are afraid that in a not-so-distant future, the ISP who for example is also a telco will start demanding that Google pays for all google voice chats over the telco's data lines. The ISP who's also a cable company will demand that Google pays for all youtube streaming, etc. This won't be a problem if Google is their own ISP.