According to this report, which relies on a story this week in the Wall Street Journal, Microsoft developers wanted to build much more robust privacy features into the new browser that didn't make it into the final release because those in the online advertising division were against the controls that would prevent tracking of user activity. We ended up with InPrivate Filtering, but it's a watered-down version of what could have (and many think should have) been. You can read more about the features that were dropped and the internal debate here:
Did they reach the best compromise that balances privacy and personalization needs? Will personalization trump privacy again in IE 9? Is privacy an increasingly unrealistic expectation in today's connected world? Your answer will depend on your own point of view and priorities, but it's sure to be the subject of much more debate - and not just within Microsoft - in the months and years to come.