Google On Protecting Emails As They Travel Across The Web

The Official Google Blog explains how the company protects your email from prying eyes. Well, except Google's prying eyes. big grin
When you mail a letter to your friend, you hope she’ll be the only person who reads it. But a lot could happen to that letter on its way from you to her, and prying eyes might try to take a look. That’s why we send important messages in sealed envelopes, rather than on postcards.