Oh, it does, it turns it into vocal-elements for remote analysis. This might seem silly to you. It does to me too. It also reduces the quality of the service; waiting (several?) round trips over (intentionally delayed to discourage voice calling) 3g networks is not a pleasant experience. But then, I am just a little programmer, and I know little of such things.
Perhaps the 'OK, Google' is processed locally (idk). Still didn't agree to it.
Lastly, and importantly, they're making chromium users download a binary. They bypass the usual distribution channels (that take in auditable source code), exposing how those channels were not secure in the first place. (no approved program should be allowed to subvert the security measures in this manner.) Falkenvinge would rather we'd blame Google.
iOS takes it up a notch, and sends voice samples out to third parties for validation of accuracy.