The NSA PRISM program was top secret until now. The NSA has a program code named PRISM which lives on the servers of major service providers that include Microsoft, Yahoo, Google, Facebook, PalTalk, Youtube, Skype ,AOL, and Apple. PRISM has been in operation since 2007 and first partnered with Microsoft. They are aiming to have Dropbox join next.
Google response has been that they disclose information to the government in accordance with the law, but they do not have any backdoor for the government to access private data.
This information was discovered in a 41-page Power Point Presentation, the reports say that the slide show was used to train intelligence operatives. As of now they are reporting that this is used to detect terrorist activity and communications over seas. Also they claim that they are only collecting metadata.
Metadata is data about data. For a phone call they would collect the numbers making the call, the duration of the call and how frequently the numbers contact each other. They say that they do not collect the phone call itself. They same would go for the other types of communications.
The slideshow presentation states otherwise. It shows what types of data will be collected from the companies servers. I have this slide posted with this post.