But that's still Google providing the advertising. In what way is your search history not contained to Google when an advertiser asks Google to display text ads with your content to people that are interested in X, Y and Z?

I can think of a few very expensive ways, but those are also ways in which Google is allowing erosion of their competitive advantage by allowing that information to leak. That, by the way, is why I don't feel particularly paranoid about Google sharing my information everywhere. Google is strongly incentivized to keep it closely guarded so other people can't monetize it in ways that cause Google to lose out.