What it does?
In simple words, your page request is sent to their (proxy) server, which checks for the page in server’s cache…if page is found then it shows that page otherwise requests new page from the website….this process should make the browsing faster but there is always disadvantage in it….
Google can always track the activities you do, i.e what sites you surf, what browser, OS you use…
It can also get your yahoo, hotmail or other passwords (unless it is behind SSL [HTTPS])
When you use Google Web Accelerator, Google servers receive and log your page requests. Page requests and data sent in encrypted form using an HTTPS connection will not go through Google. It is possible that some personally identifiable information could be sent to Google, if the information is sent without using an encrypted (HTTPS) connection.
This makes me think twice before using it…but I think we can have that much trust in google..hehe
You can get more info about the software on their official page