I don't think the problem is so much the use of the word privacy but that the 
wording in Privacy settings is rather brief and open to misinterpretation.  For 
example in the Recent Items tab it says
"Every time a file or an application is used, some information can be stored.  
This activity can be used to retrieve files during searches or as history in 
applications"
To an uninitiated user it is not clear where the information is being stored, 
off on the internet somewhere perhaps?  The phrase "this activity can be used 
to retrieve files during searches" suggests the possibility of a third party 
somewhere searching through your files.  It sounds like the sort of wording 
used in the small print of a contract.  In fact if that sentence is read 
carefully it does not actually make sense, 
I think the whole thing could be made much clearer if there were a few 
sentences giving the background to what this is all about, explaining that the 
information is for the use of the PC user and that the it is stored on the PC 
and is not sent off anywhere.

This is compounded by the wording on the Diagnostics tab that states:
"Ubuntu can collect anonymous information that helps developers to improve it". 
 Apparently there is no option to prevent this information from being collected 
and sent off.  When the Privacy Policy button is clicked this takes one off to 
the website where it talks about how Canonical will use your personal 
information, which does not give the right impression at all.

I understand personally that there is not a privacy issue here, but to a
less informed individual this may not be clear at all and may lead
him/her to think that he is being snooped on.

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https://bugs.launchpad.net/bugs/967056

Title:
  The privacy section should be renamed, oneiric users think
  confidential data is sent because there is no option to inhibit this

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