It means whatever Google explains it to mean. Google can either be vague about it, or they can be clear and informative. Google is the one collecting the data. Only they know what is captured and for what purpose. It's their responsibility to explain clearly what they track and record. All of the questions you pose are ones that Google can answer.

I disagree that strict wording prevents the evolution of the software. It might prevent Google from mining user data in order to build a profile of user likes and behaviour. But I consider this type of data capture and analysis to be extend beyond the boundaries of simply improving a piece of software.