In simplest terms, each user owns Steemit. As an owner, you can see the transactions that affect the blockchain.
As for privacy, I can see what anyone pays into their Steem Wallet and pays out of it, and to who. I cannot see what you paid for (unless you put it in a memo) and if you transfer it to an exchange (ex blocktrades) I cannot see what you bought on the exchange or what happens to it from there (unless I really want to follow the transaction trail on whatever blockchain you bought currency on).
This is really not uncommon with cryptos in general. I can see any transaction associated with a bitcoin address with little work.
Thanks for the insight.. May be my surprise stems out of the fact that I didn't know this from the beginning. I am confident a lot more people do not know this.
I find that the status quo for TOS and FAQ's is that people don't read them (or just skim the headlines) and agree to anything. This is in part because they are long and boring, and in part because many are pretty much the same.
Steemit is as anonymous as you want to make it. If you're concerned about people seeing your transactions, you can always use one account to "earn" and another account to "spend". If you don't want them to appear linked, you can buy/sell through an exchange.