The headline is misleading and this story is horribly one-sided. It is written as though Yahoo's policy is a breakthrough for privacy:

"Under the new policy, Yahoo will delete the last eight bits of the Internet Protocol, or I.P., address associated with a search query after 90 days."

This is the same trick that Google is trying to play on us. Basically, they still retain all information they use to track you indefinitely, except for 8 bits of it. With decent data-mining software you can still identify somebody pretty accurately even without those 8 bits.

Here is a better story that gives better information: http://tech.yahoo.com/news/nm/20081217/wr_nm/us_yahoo_data