Google told the Wall Street Journal Wednesday that it no longer scans Google Apps for Education email. Google was sued last year by students and others over email scanning, claiming it was a violation of wiretap laws.
Aside from wiretapping, there were concerns that scanning inboxes was a violation of the Family Educational Rights and Privacy Act, which establishes security/privacy around school records. Education Week has an in-depth report about the lawsuit and the arguments involved. Note: Judge Lucy Koh, familiar to Apple-watchers, is also the judge in this case.
There were no ads present in Google Apps for Education, but the scanning still occurred, presumably collecting data for advertising to students outside of inboxes.
Director of Google for Education Bram Bout stated the scanning is finished, and data is no longer being collected or used. He also said that similar changes are coming to Google Apps for Business as well as government users.