re: generational difference in privacy attitudes. The older generations who grew up in small towns or tight-knit neighborhoods gossip(ed) about each other like crazy. Pretty much every aspect of their lives was public knowledge among their friends and associates. (e.g. If you wanted to know where the pretty girls were hanging out - just go out and ask someone.) The sense that there is safety in anonymity may have been something very specific to the suburbia generations (boomers/X).
In the small-town instance, while everyone knew your business, you also generally knew both who every was, and what their business was.
The illusion of social networking is that you're performing in front of a window such that you can see who's viewing you. You're not. You're performing in front of a two-way mirror -- others can see in, but you cannot see out. You can only view their own two-way mirrors.
The telling bit for me is that the companies who are most interested in sucking down personal information, Facebook, but even moreso Google, put extreme controls over outward flows of their data.
Yes, and that's where the desire for privacy comes from. Nobody can gossip about what they don't know (well... to a first approximation, anyhow), and the only way to prevent the gossip mill from passing around some tidbit is to ensure that it is never discovered in the first place.
Privacy is a defense against the gossip mill. Infusing the gossip mill with digital might isn't going to make the desirability of that defense go away.
That's a certain type of privacy, but it seems that most of the concern revolves around employers/creeps/government/etc accessing the information through some backdoor method.
I'm not so sure if most people actually mind if their old high school friends are gossiping about their latest relationship status update. Facebook functions as a personal PR tool to "get out in front" of the gossip. But perhaps you're right and things are changing.