Check out your GMail inbox and you may notice a new icon on the left. It's a place to search you chat histories from GTalk. If you've been irritated that you only have a few lines of viewable chat history in GTalk, you will probably find this feature to be a great new addition.
While Google has been recently tarnishing their "Don't be evil" reputation/mantra recently in the eyes of some because of their dealings with the Chinese government, they appear to be trying to bring back a little of that luster with this feature.
While it doesn't appear to be available in my account yet, there will eventually be able to go "off the record" with a particular contact. When you do that, chat histories are not saved on either end for the conversation. I guess the real question is if the data is being saved and used by Google if you are "off the record".