In short, the change means that Google now combines everything it knows about logged in users from all its services -- YouTube, Google search, Gmail, etc. -- into one database. Google said it changed how it uses the data so it could build detailed individual profiles, which provide more precise search results with pinpoint specific ads to users.
Think of it this way: If you send an e-mail from Gmail about wanting to go on a vacation, and you watch a YouTube video of the aurora borealis, you could start seeing ads in your next Google search for travel deals to Iceland or Alaska. Before, your YouTube, e-mail, and search data were separate.